THE GREAT RECESSION IS OVER

The global economy is recovering from what the IMF's managing director Dominique Strauss-Kahn has dubbed the "Great Recession".

In fact, the IMF had told before that the recovery had started, but the picture is becoming a little clearer. There is even a little good news. The IMF tells  "the recovery has been stronger than expected thus far".

Actually, we should perhaps talk about recoveries, plural.

There are two rather different stories in different groups of countries. In the rich nations, the recovery is, for the most part, "tepid".

In the emerging economies, it is "solid". It is the latter group that is leading the way.

The forecast for the advanced economies is growth of less than 2.5% this year and next. In normal circumstance, that wouldn't be all that bad. But it is pretty disappointing as a recovery from such a nasty recession.

In a BBC interview, the IMF's chief economist Olivier Blanchard said: "Although growth is close to the pre-crisis rate, the problem is we lost a lot of ground during the crisis that we are not making up."

Inventory cycle

Two features of the recovery are worth emphasising. First, the importance of government and central bank policies to stimulate activity.

The IMF says that the policies have been essential in fostering the recovery, although some economists dispute the claim.

It is reasonable for American consumers to have more responsible saving behaviour than before the crisis, and this means lower growth of consumer spending : Olivier Blanchard, chief economist, IMF

Second, there is what is called the inventory cycle. Industrial companies hold stocks of materials, components and finished goods and they manage these inventories - for perfectly sensible commercial reasons - in a way that tends to aggravate the economic cycle.

In a downturn, they run stocks down, and they did that rapidly this time, drastically so in the US.

Now they are rebuilding stocks - or at least reducing them more slowly. (It actually makes a positive contribution to growth if firms don't sell off their stocks as quickly as they were.)

The problem with both these sources of growth is that they will fade. Governments can't afford to spend at current levels for ever, and businesses won't refill their warehouses indefinitely.

Repairing finances

So the question the IMF poses is whether the stronger inventory rebound is a sign of a coming healthy recovery.

The IMF's conclusion is, probably not. What is needed is private spending to take over from the stock building and government stimulus. The IMF says there is little evidence of that.

Mr Blanchard agreed that the factors restraining the developed economies were likely to persist for a while.

"It is reasonable for American consumers to have more responsible saving behaviour than before the crisis, and this means lower growth of consumer spending," he said.

The availability of bank credit in Europe is likely to be an issue for some time. So, he said: "We have to expect domestic demand [in the rich countries] to be fairly low for a while."

Credit is likely to remain hard to come by for many people, unemployment will hold back consumer spending, and investment spending will also be undermined by the amount of spare capacity that firms have as a result of the recession - why invest when you aren't fully using the equipment you already have?

The need to repair government finances and reduce deficits could also affect household spending, because taxes will rise while pay for those working in the public sector will be constrained.

Domestic demand

The other recovery in the developing world looks rather different and is more positive.

Developing economies did not, for the most part, suffer the kind of shocks to their financial systems that did so much damage in the rich world, and they have not had such large increases in unemployment.

In the developing countries of Asia, for example, the recovery, such as it is, in the United States has helped exports. But demand for goods and services at home has been strong too, from both government and private sector.

In both the continent's giants, India and China, the IMF says that strong domestic demand will continue to support the recovery.

So might we be looking at a long period of sluggish growth in rich economies and a dynamic emerging world?

For the IMF, Mr Blanchard would like to see the rich nations doing better than his forecast. But he did say "it is a good thing for the world if the countries that are behind are catching up".

These IMF forecasts are not for the long-term. They cover this year and next. But they do show a recovery still being held back by the rich world, while the emerging economies breathe a sigh of relief, knowing the contagion could have been so much worse.