World Bank fears sharper contraction, IMF predicts faster recovery

June 12th, 2009 - 12:32 pm ICT by IANS  

By Arun Kumar
Washington, June 12 (IANS) The World Bank estimates the global economy will contract in 2009 by “close to three percent”, a far bleaker assessment than its March estimate of a 1.7 percent contraction. But the International Monetary Fund (IMF) differed, predicting a global recovery in 2010 may expand at a 2.4 percent clip.

The world economy is set to contract this year by more than previously estimated and poor countries will continue to be hit hard by multiple waves of economic stress, World Bank President Robert Zoellick said Thursday.

Even with the stabilisation of financial markets in many developed economies, unemployment and under-utilisation of capacity continue to rise, putting downward pressure on the global economy, he said.

Most developing country economies will contract this year and face increasingly bleak prospects unless the slump in their exports, remittances, and foreign direct investment is reversed by the end of 2010.

“Although growth is expected to revive during the course of 2010, the pace of the recovery is uncertain and the poor in many developing countries will continue to be buffeted by the aftershocks,” Zoellick said ahead of the Group of Eight (G8) finance ministers meeting in Italy.

“Waves of economic pain continue to hurt the developing world’s poor, who have less cushion to protect themselves. There is much more we need to do in the coming months to mobilize resources to ensure that the poor do not pay for a crisis that is not of their making,” he said.

But the Wall Street Journal cited a briefing paper by the IMF as saying a global recovery in 2010 may expand at a 2.4 percent clip. The paper credits the faster-than-expected rebound to stimulus spending by developed nations.

The duelling forecasts indicate how difficult it is to predict the course of a downturn that has battered wealthy and poor countries alike for the first time since the Great Depression, the leading US financial daily said.

The IMF forecast comes from a briefing paper for the G8 ministers, it said citing individuals familiar with the content. The estimate of 2010 world growth at 2.4 percent compares to the fund’s April prediction of 1.9 percent. The IMF will release a formal forecast in time for the G8 summit.

In April, the IMF also estimated the global economy would shrink by 1.3 percent in 2009. The IMF and World Bank estimates aren’t directly comparable because they measure growth somewhat differently. The World Bank’s latest update didn’t include a forecast for 2010, the Journal said.

(Arun Kumar can be contacted at arun.kumar@ians.in)

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