Saturday, January 31, 2009

IMF warns of world economic recession

IMF warns of world economic recession
Written by Kabanda Chulu and Chiwoyu Sinyangwe
Saturday, January 31, 2009 11:19:11 AM

INTERNATIONAL Monetary Fund (IMF) chief economist Olivier Blanchard has warned that the world economy is moving towards recession and will only grow by 0.5 per cent in 2009.

Releasing the 2009 World Economic Outlook (WEO) on Wednesday, Blanchard stated that the global economy was expected to come to a virtual standstill this year.

“I am a bearer of bad news, in the last three months, the global economy has taken a turn for the worse, as financial markets have remained under stress and global output and trade have sharply decreased,” Blanchard stated.

“We expect advanced economies to experience their sharpest contraction in the post-war period with the United States’ real economic activity to contract by one per cent, the Euro zone will contract by two per cent and two and half per cent for Japan and emerging and developing economies will also suffer serious setbacks, as a result global growth is projected to decline sharply to 0.5 per cent in 2009.”

Blanchard stated that the global financial crisis had taken an increasingly heavy toll which was penetrating through different channels across countries.

She stated that the crisis had also made it much more difficult and costly for consumers and firms to borrow, hence dragging down activity and trade and in emerging economies.

“Stronger policy actions are needed to restore the financial sector’s viability. We need more aggressive actions through a unified approach involving liquidity provision, capital injections and disposal of problem assets but there should be no ‘one size fits all’ policy mix since all countries have different fiscal and monetary space,” stated Blanchard.

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