World on cusp of recession, says IMF managing director

October 9th, 2008 - 10:47 pm ICT by IANS  

Washington, Oct 9 (DPA) The US financial crisis has gone global, putting the world on the brink of a recession that can only be resolved through international cooperation, International Monetary Fund (IMF) managing director Dominique Strauss-Kahn said Thursday.In a press conference at IMF headquarters in Washington, Strauss-Kahn warned that a lack of confidence was the most immediate crisis gripping financial markets. He said it had rendered typical government tools - such as lowering interest rates - much less effective.

Strauss-Kahn said the priority has to be the recapitalisation of financial institutions, whose balance sheets have been decimated by the drop in value of mortgage assets. He urged advanced economies to coordinate their efforts to help those cash-strapped banks and lenders.

“We are on the cusp of a recession,” he said. “Cooperation and coordination in action is the price of success.”

“No country is immune” from the financial turmoil, Strauss-Kahn warned. Emerging countries are also witnessing slower growth as they struggle with falling demand for exports and their own inability to get loans.

The IMF Wednesday forecast global growth would fall to three percent in 2009, down from 3.9 percent this year. A global recession is considered to exist when growth registers under 3 percent. Advanced economies were projected to grow at close to zero over the course of next year.

Strauss-Kahn said the one hopeful message is that a recovery is likely to get underway in mid- to late 2009.

Global markets have been falling on a daily basis amid fears of more bank failures and a sharp slowdown in economic activity.

Financial ministers and central bank heads arrive in Washington Friday for the annual IMF and World Bank meetings. The Group of Seven industrial nations will meet Friday to discuss their next moves to address the crisis.

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