IMF: Global rebound 'not the recovery we wanted'

NEW YORK (CNNMoney) -- Growing economic imbalances on a global scale and greater income inequality could fuel the next crisis, the head of the International Monetary Fund warned Tuesday.

"While the recovery is underway, it is not the recovery we wanted. It is a recovery beset by tensions and strains -- which could even sow the seeds of the next crisis," IMF Managing Director Dominique Strauss-Kahn said in a speech in Singapore.

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His comments seemed to underscore the outbreak of riots in Tunisia, Egypt and other countries in the Middle East, but Strauss-Kahn was speaking about the issue on a much broader scale.

High unemployment and growing income inequality could lead to political unrest, even in the United States, he said. And rising commodity prices are a particular strain on emerging economies, but also a danger that could bring about higher inflation worldwide.

"Energy prices are rising swiftly, reflecting rapid growth in the emerging economies," Strauss-Kahn said. "Food prices are rising too ... with potentially devastating consequences for low-income countries. Together, these price increases are beginning to feed into headline inflation."

Speaking to CNN's Richard Quest at the World Economic Forum in Davos, Switzerland, World Bank President Robert Zoellick echoed those concerns.

"Food prices can often set things off because when prices go up, it's a strain on all of us, but for those living at the lower end, it's a very big part of their budgets"

Often misconstrued as a problem of emerging countries only, the gap between the richest and poorest in the U.S. peaked before the Great Recession, to levels not seen since the Great Depression.

And in the recession's aftermath, inequality is on the rise. That's a problem, Strauss-Kahn said, because it makes countries prone to future shocks.

"As tensions within countries increase, we could see rising social and political instability within nations -- even war," he said.

Strauss-Kahn also warned of global growth that's off-kilter. Economic growth in developed countries is still subdued by high unemployment and debt. But emerging markets -- especially in Asia -- are hurling ahead at a rapid pace, and are still being powered by exports.

For 2011, the IMF is predicting 2.5% economic growth across the developed world, and a rate of 6.5% growth for emerging economies.

Strauss-Kahn offered a few solutions to re-balance the recovery. Among them, re-regulate financial services, cut national deficits and improve education, he said.

Meanwhile, developed economies like the U.S. should continue to try to create jobs by stimulating their economies, while rapidly emerging countries should tighten their reins, to prevent their growth from overheating, he said.

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