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World economy in severe recession and may shrink 1.3% this year: IMF
The International Monetary Fund said yesterday the world economy has fallen into a severe recession, cutting its forecast for global growth and calling for forceful action to spur a recovery.
- Agencies
- Published: 23:04 April 22, 2009
Washington: The International Monetary Fund said yesterday the world economy has fallen into a severe recession, cutting its forecast for global growth and calling for forceful action to spur a recovery.
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-World War Two recession by far.
Growth is set to re-emerge to around 1.9 per cent next year, a pace more sluggish than average recoveries because of lingering strains in the financial sector, it added. Just three months ago, the IMF had projected global growth of 0.5 per cent but two months later warned it would fall into deeply negative territory.
The Washington-based institution said its revisions to the global outlook stem from assumptions that financial markets will take longer than previously expected to stabilise.
The Fund warned that the turnaround depends on efforts by governments to nurse the global financial sector back to health by cleaning banks' balance sheets, and on additional fiscal and monetary policies in advanced economies.
"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 stimulus measures should at least be sustained, if not increased, in 2010, and it warned 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 added that where there was room for further easing, authorities should move quickly to cut interest rates.
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