In its latest World Economic Outlook, the IMF said the global economy would likely contract 1.3 per cent this year in the deepest post-Second World War recession by far. Growth is set to re-emerge at a sluggish 1.9 per cent next year but the pick-up depends on aggressive measures to repair a poorly functioning financial system. "The longer this goes on, the longer and the deeper will be the recession," IMF chief economist Olivier Blanchard said. Just three months ago, the IMF had projected global growth of 0.5 per cent, although last month it warned of a deep recession. The Washington-based institution said it revised its forecasts downward because financial markets appear likely to take longer to stabilize than it had thought earlier. "A key concern is that policies may be insufficient to arrest the negative feedback between deteriorating financial conditions and weakening economies in the face of limited public support for policy actions," the IMF said. The IMF said on Tuesday that banks and other financial institutions around the world faced losses which could amount to $4.1 trillion. It said banks would likely need to raise $875 billion in fresh capital. In offering new economic projections, the IMF said government measures to battle recession should be sustained, if not increased, in 2010, warning that premature withdrawal of stimulus could set back a recovery. It said interest rates in major advanced economies are likely to be lowered to or remain near zero, and said authorities should move quickly to cut interest rates where there was room for further easing. Mr Blanchard said emerging markets were dealing with a sharp drop in capital flows and a collapse in global trade. While, growth is expected to pick up in emerging nations, including China and India, a recovery to previous healthy levels will depend on a pick-up in advanced economies. The IMF said the United States remains at the epicenter of the crisis, and it said it now expected the US economy to contract 2.8 per cent this year. It said while there were signs the US recession might be easing, a recovery was unlikely to take hold until next year, which would leave 2010 gross domestic product flat. "There has been some improvement in business confidence, some signs of bottoming out in the housing market, but these are early days and we should not expect a return to growth any time soon," IMF economist Charles Collyns said.IMF predicts world recession will deepen
The International Monetary Fund has slashed growth forecasts
for every major country and urged governments to take forceful
action to ensure the world economy's recovery from a severe recession.
Thursday, 23 April 2009
Posts
