A drop in Chinese exports and falling prices in Japan and Germany underscored the weakness of the world economy, while the IMF said governments are moving too slowly to rid banks of their toxic assets. The warning from International Monetary Fund head Dominique Strauss-Kahn on Wednesday came despite signs of recovery at US banking group Citigroup Inc, which buoyed stock markets in the United States and Asia. Switzerland's UBS AG, however, provided a reminder of the fragility of the global banking system. The world's biggest wealth manager said earnings would remain at risk for some time, as it revised up its full-year net loss to 20.9 billion Swiss francs ($18.1 billion) European shares fell in early trade. Strauss-Kahn said the IMF was still projecting the world economy will recover from mid-2010, but only if governments move quickly to implement stimulus measures and banks' balance sheets are cleared of toxic assets. “On the (bank) restructuring side things are really lagging ... I'm afraid that if it goes that way for two or three more months then recovery in 2010 will be difficult,” he told Reuters in an interview. The effects of the economic downturn are being felt on global trade flows, with China reporting its trade surplus shrivelled to $4.84 billion in February, much lower than analysts had expected. Exports fell by a quarter from year-ago levels, the biggest drop since bankers started keeping records in 1993. “China has finally and spectacularly succumbed to the world financial crisis on the export side, and it's difficult to see why that would improve in the short term,” said Paul Cavey, an economist with Macquarie Securities in Hong Kong. Governments are pumping money into their economies and central banks are slashing interest rates in a bid to prevent recession turning to slump. The US Congress on Tuesday approved a $410 billion bill to fund most of the government through to Sept. 30, despite Republican objections to the price tag. South Korea also plans to introduce a supplementary budget worth $20 billion this month to boost domestic demand, the ruling party was quoted as saying. In Britain, the Bank of England will officially start quantitative easing -- effectively printing money to help pull the economy out of recession.
