World plunging into ever-deeper recession: IMF

April 22nd, 2009 - 8:25 pm ICT by IANS  

Washington, April 22 (DPA) The International Monetary Fund (IMF) Wednesday offered its most dire picture yet of a world that is plunging into by far its deepest recession since World War II.
The IMF further slashed its economic forecast from just one month ago, predicting the global economy will shrink by 1.3 percent in 2009 and recover to only 1.9-percent growth in 2010. The IMF in March predicted a range of 0.5-1 percent for this year.

All corners of the globe are feeling the pinch this year, including developing countries, as a financial crisis which originated in the US has engulfed many of the world’s banks and wider economies.

World trade will shrink 11 percent this year, the IMF said, devastating export-driven economies like Japan and Germany as consumers and businesses are hoarding cash and trying to keep their domestic industries afloat.

Advanced economies as a whole will shrink 3.8 percent in 2009 and most of the world’s wealthiest nations will hit double-digit unemployment in the coming years. Developing countries are still expected to grow by 1.6 percent this year, but that is down sharply from 6.1 percent in 2008.

The picture in Europe has grown especially dark. Separate housing crises in Britain, Ireland and Spain have added to the continent’s exposure to troubled assets the US mortgage market.

The 16 European countries that use the euro currency will shrink 4.2 percent in 2009 and 0.4 percent in 2010, the IMF said, slashing its March prediction for 2009 by another 1 percent. Britain, which has remained outside the euro zone, will contract 4.1 percent this year and 0.4 percent next year.

Europe’s troubles have become far worse than those in the United States, which will see its economy shrink 2.8 percent this year before flat-lining at 0 percent in 2010, the IMF said in its World Economic Outlook.

The financial turmoil, which has already cost banks at least $1 trillion and prompted all institutions to cut back on lending to consumers and businesses, remains at the centre of the crisis.

Despite a series of dramatic interventions by US and European governments since September, the IMF said the efforts have so far “failed to arrest the downward spiral.”

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