World suffers worst downturn in post-war period: IMF

January 28th, 2009 - 11:54 pm ICT by IANS  

Washington, Jan 28 (DPA) The world economy will grow by only 0.5 percent in 2009, the worst rate since end of World War II, as industrial nations battle a severe recession that is dragging developing countries down with them, the International Monetary Fund said Wednesday as it slashed its global economic forecasts.Wealthy nations will experience their worst recession in the post-war period, contracting 2 percent in 2009 despite massive fiscal stimulus packages planned by most of the world’s richest countries.

The United States will contract by 1.6 percent and Germany - Europe’s largest economy - by 2.5 percent, the IMF said.

Growth in emerging and developing countries will also slow dramatically in 2009 to 3.3 percent from 6.3 percent in 2008. China’s economy will slow to 6.7 percent in 2009 from 9 percent, India’s will drop to 5.1 percent and Brazil’s growth will plummet a whopping 4 percentage points to 1.8 percent in 2009.

In its November update, the IMF had forecast 2.2-percent global growth for 2009, a contraction of 0.3 percent in advanced economies and 5.1-percent growth in developing countries. World growth below 3 percent is considered a global recession.

The global downturn continues to be led by the financial crisis which began with a collapse in the US’ housing market but has since spread to all corners of the globe.

Financial firms are now projected to lose a total of $2.2 trillion before the crisis is over - about $500 billion more than banks currently have in their reserves.

“Global economic recovery depends first and foremost on dealing with the financial crisis,” said Charles Collins, the IMF’s deputy director of research.

Governments still need to take more drastic actions to shore up banks, revive lending to consumers and “break the corrosive spiral between financial and economic weakness,” Collins said.

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