World economy between recession and inflation - IMF

By Sabina Zawadzki

YALTA, Ukraine (Reuters) - The world's economy is teetering between "the ice of recession and the fire of inflation", but may see some recovery by early next year, IMF Managing Director Dominique Strauss-Kahn said on Friday.

Addressing a conference in the Ukrainian Black Sea resort of Yalta, Strauss-Kahn characterised the economic situation as the "first crisis of the 21st century" made up of soaring inflation and a financial market crisis. But the crisis was receding.

"No one can say that the world economy is at a good temperature," he said.

"We are just between the ice of recession and the fire of inflation," he said, adding that soaring energy and food costs had topped the agenda of a meeting of leaders of G8 industrialised countries in Japan.

Strauss-Kahn said U.S. growth in the first quarter was better than expected at 0.9 percent, but anticipated a global economic recovery only in the first or second quarter of 2009.

The world economic order, he said, was rendered more unpredictable by the fact that the financial crisis originated in the United States amid doubts over low standard mortgages.

"It was the strongest economy and it was on the top of the pyramid of power," he said. "What happened now is that the pyramid is a bit upside down. It is no longer a pyramid of risk."

Although the worst of the financial market crisis was over, more challenges lay ahead.