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Recession goes on

Recession goes on
The global economy remains weak and it is too early to conclude that it is emerging from recession, the International Chamber of Commerce said Monday.

The global economy remains weak and it is too early to conclude that it is emerging from recession, the International Chamber of Commerce said Monday.

The global economy remains weak and it is too early to conclude that it is emerging from recession, the International Chamber of Commerce said Monday.

The ICC, which brings together national business groups from around the world, also said the cost of obtaining trade finance continues to rise, despite a $250 billion program launched by the Group of 20 industrialized and developing economies in April.

The ICC's statement follows a meeting of G20 finance ministers and central bank heads Friday and Saturday. They said they remain cautious about the economic outlook, and will continue to implement "expansionary" fiscal and monetary policies.

"The global economy is still on shaky ground, and despite budding signs of recovery, evidence is not strong enough to conclude that the current recession is waning," the ICC said.

In April, G20 leaders agreed to support the financing of trade flows totaling $250 billion over the next two years.

As a result of the intensification of the financial crisis in September 2008, banks and corporations became more reluctant to take on cross-border credit risk, reducing the supply of short-term loans for exports and imports.

That contributed to a sharp downturn in global trade volumes. According to the Netherlands Bureau for Economic Policy Analysis, trade volumes fell 11.2% in the first quarter, having declined by 7.1% in the fourth quarter of 2008.

But banks involved in financing exports and imports now report an increase in trade volumes, and demand for their services.

The ICC said a survey of 122 banks in 59 countries conducted in July and August found 67% reported either a stabilization or increase in trade volumes during the first half of 2009.

The survey found that demand for trade finance increased compared to the first half of 2008. It also found that the cost of securing trade finance is rising.

"The costs of obtaining traditional trade finance products are still rising," said Gary Collyer, an adviser to the ICC on banking.

The ICC said one way of increasing the availability and cutting the cost of trade financing would be to recognize its relatively low-risk nature under the Basel II capital adequacy rules.

That would mean banks would have to set aside less capital against loans to finance exports and imports.

The ICC said it expects there to be problems relating to the availability of trade finance well into 2010.

"A recovery in demand for merchandise trade without a corresponding increase in the ability of banks to provide credit, would risk a significant dislocation of trade, thus hampering the global recovery," the ICC said.

www.TurkishMaritime.com.tr

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