The credit crisis is easing, but it is too early to say it is ending, a senior official of the Institute of International Finance (IIF) told Xinhua in an interview here on Thursday.
"Many banks still have substantial amounts of subprime debts and other structured products that are illiquid and not highly valued in the market," IIF managing director Charles Dallara said.
"Also, some banks are exposed to the potential next wave of credit problems in the U.S. economy, that is to say, consumer debt, such as credit cards and auto loans."
The Washington-based IIF is an association of more than 375 financial institutions in more than 70 countries.
Dallara said he believed that the U.S. economy would see some rebound in the second half of the year after witnessing virtually flat growth in the first half.
"We expect the U.S. economy to pick up pace and grow at an annual rate of around 2 percent in the second half," he said, citing factors such as interest rate cuts, tax rebates and strong performances by export-oriented companies.
Dallara admitted that excessive caution by U.S. banks in approving small consumer loan applications, in the wake of the subprime crisis, could dampen the recovery of the U.S. economy in the second half.
"We also expect economic weakening in Europe and all emerging markets this year," he said.
He added that the average growth rate for the emerging markets would slow to 5 percent this year from 6 percent last year."
Robust growth in some emerging markets, including China, Brazil, and Russia, would provide "a source of energy" for the world economy, helping to replace the loss of energy in the United States, he said.
Dallara noted that the economic loss from the magnitude 8.0 earthquake in China, although large in absolute terms, would only have a small, transient impact on the overall economy and prices in China.
Reconstruction would give a boost to the economy over the next two to three years, he said.
Inflation was forecast to slow noticeably by the end of the year as the interest rate cuts, reserve requirement ratio increases and fast appreciation of the yuan started to take effect, Dallara added.
China's consumer price index, the main gauge of inflation, rose 8.5 percent in April from a year earlier, up from March's 8.3 percent and below the 12-year-high of 8.7 percent.
The People's Bank of China, the central bank, has raised interest rates six times and the bank reserve ratio 14 times since last year, amid efforts to curb inflation and prevent economic overheating.
(Xinhua News Agency May 23, 2008)
