IMF predicts lowest global growth in 60 years
By Alan Beattie in Washington
Published: January 28 2009 14:47 | Last updated: January 28 2009 14:47
The International Monetary Fund slashed its forecasts for the world economy on Wednesday, saying that global growth would come almost to a standstill and that losses from US financial assets would top $2,000bn.
The IMF cut its 2009 global growth projection to just 0.5 per cent, a huge downward revision from its previous 2.2 per cent forecast made in November.
”We now expect the global economy to come to a virtual halt,” said Olivier Blanchard, the IMF’s chief economist.
The rich economies in particular were likely to suffer the sharpest recession since the second world war, the IMF said.
The UK was likely to shrink the fastest out of the large industrialised economies, dropping 2.8 per cent this year, with the US contracting 1.6 per cent, the eurozone 2 per cent and Japan 2.6 per cent.
Although the big emerging market economies would hold up better than in previous downturns, the IMF also revised down growth in the developing world, with China’s economy this year expected to grow 6.7 per cent and India’s by 5.1 per cent.
The IMF reiterated its view that more financial sector restructuring would be needed before the credit markets could function properly as part of an economic recovery.
”For this purpose, new policy initiatives are needed to produce credible loan loss recognition; sort financial companies according to their medium-run viability; and provide public support to viable institutions by injecting capital, and carving out bad assets, including possibly through a ‘bad bank’ approach,” the fund said.
Source: FT.com / Global Economy - IMF predicts lowest global growth in 60 years