IMF chief sees no global recovery before '09

JERUSALEM, May 14 (Reuters) - The International Monetary Fund (IMF) does not expect the global economy to recover before 2009 even though a "large part" of the financial crisis may be over, its chief Dominique Strauss-Kahn said on Wednesday.

"It's too early to know if the financial crisis is really behind us," Strauss-Kahn told a conference in Jerusalem to mark 60 years since the founding of Israel in 1948.

"Probably a large part of the financial crisis is behind us, but it is difficult to know if everything is behind us," he said during a session on the global economy. "How long will the slowdown last? I don't see a recovery before 2009," he said.

Strauss-Kahn noted that robust emerging markets such as China, India and Brazil were underpinning the global economy, despite a crisis that started in the U.S. subprime mortgage sector -- a problem he said persisted.

Along with the U.S. housing crisis, one of the biggest issues facing policymakers was imbalances between global currencies, with some undervalued and some overvalued. He did not give specifics.

Rising oil, commodity and food prices also remained a drag on the global economy, he said.

European equity markets firmed and the dollar rose broadly on Wednesday as worries about U.S. economic growth eased on the back of better-than-expected U.S. retail sales data and attention turned to inflationary pressures.

But Goldman Sachs senior global strategist Abby Joseph Cohen, also speaking at the conference, echoed Strauss-Kahn's caution, saying "the pain is not over" for the U.S. economy.

"SIGNS OF STABILITY"

However Joseph Cohen said she expected the world's biggest economy to stabilise in the second half and to register growth in 2009.

"Over the next few months economic data in the United States will show signs of stability, and we think that in 2009 we will have a year of economic growth," she said. "It won't be 4 percent ... but there will be a plus sign in front of it."

Joseph Cohen said predicting the impact on financial markets was a tougher task. She said there were signs that market volatility had eased, that the global appetite for risk was starting to recover and that U.S. equity and corporate bond markets were behaving "more normally".

"We do believe things are in the process of improving..." she said. "Some lenders have come back into market, some equity investors are coming back into the market and some banks are starting to lend."

On Israel, which celebrates its 60th year this year with a thriving technology-led economy but with uncertainty over faltering efforts for peace with the Palestinians, Strauss-Kahn said the outlook for economic stability was "not bad" thanks to low inflation and improved fiscal prudence.

But when asked about prospects for the next decade, he said high levels of growth would depend on an improved economic outlook and political stability elsewhere in the Middle East.

"There is no way to forecast a high level of growth without having a high level of growth in the neighbourhood," he said. "The regional outlook is something that is very important."

(Writing by Rebecca Harrison; Editing by Ibon Villelabeitia)

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