THE world economy is expected to contract in 2009 for the first time in 60 years and governments should do more to counter the downturn, the International Monetary Fund said yesterday.
The global economy will shrink between 0,5 and 1% this year, the IMF said, while the US economy will contract 2,6%. The figures represent a sharp downward revision from the IMFâ€™s January estimates, when it expected the global economy would grow 0,5% this year, and the US economy would shrink 1,6%.
The Fund made the projections in a paper it presented last week to a meeting of the Group of 20 finance ministers in London. The IMF released the paper yesterday. In the paper, the IMF called on G-20 governments to take steps to relieve their financial systems of distressed assets and free up credit.
Without such action, â€œthe (global) recession will be deeper and more prolonged,â€ even if countries take steps to stimulate their economies, the IMF said.
The G-20 includes advanced economies such as the United States, the United Kingdom and Japan, and major developing nations like China, India and Brazil. Leaders from those nations will meet during a summit in London on April 2.
The IMF called on the G-20 countries to spend the equivalent of 2% of their gross domestic product on stimulus efforts in 2009 and 2010. Treasury Secretary Timothy Geithner has endorsed that target, while many European governments have resisted the call.
The IMF said global GDP fell an â€œunprecedentedâ€ 5% in the final quarter of last year. â€” Businessweek.