by Mathew Katz

In an article set to be published tomorrow, IMF Chief Economist Olivier Blanchard says recovery has begun but warns that returning the economy to "normal" is going to be a long, hard process. He writes:

The turnaround will not be simple, the crisis has left deep scars, which will affect both supply and demand for many years to come.

As for what that recovery will look like, Blanchard has a few ideas:

First, the crisis is likely to have led to a decrease in potential output. One should not expect very high growth rates in the recovery.

Second, sustained recovery in the United States and elsewhere eventually requires rebalancing from public to private spending.

Third, sustained recovery is likely to require an increase in U.S. net exports and a corresponding decrease in the rest of the world, coming mainly from Asia.

Blanchard also notes that even though current forecasts predict positive growth in many countries, it will "will not be quite strong enough to reduce unemployment, which is not expected to crest until some time next year."