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03.04.2009 19:31 World Economy Review - March 2009

The International Monetary Fund forecasts the global economy will contract by between 0.5 and 1.5 percent this year, Italian news agency ANSA reported, citing an IMF document. The grim projections, dated March 18, are the latest in a series of downward revisions by the IMF as the global recession deepens.
IMF official Teresa Ter-Minassian told reporters the Fund saw world growth contracting by 0.6 percent this year - figures which a spokesman for the Washington-based body said were "unofficial and already out of date". The fund`s most recent official forecasts, in January, pointed to growth of 0.5 percent.
The latest document, which ANSA said had been presented to officials from the Group of 20 rich and emerging nations, forecasts a gradual recovery next year with global gross domestic product growing by between 1 percent and 2 percent.
The IMF forecasts GDP will fall by 2.6 percent this year in the United States and contract by 3.2 percent in the euro zone. But the document cited by ANSA forecasts 5.8 and 0.2 percent contractions respectively this year and next in Japan, the world`s second largest economy, compared with Ter-Minassian`s forecasts for a 5.0 percent shrinkage and zero growth. Both said growth in 2010 would be 0.2 percent in the United States and 0.1 percent in the euro zone. The document cited by ANSA forecast that GDP in relatively dynamic emerging economies would grow by between 2.0 percent and 2.5 percent this year and by 3.5 percent and 4.5 percent in 2010.
At that time, the World Bank more than halved its forecast for growth in developing nations, from 4.4 percent to 2.1 percent. The revision reflects the speed and ferocity with which the financial crisis has restricted economic activity since the World Bank issued its last forecast in November.
With the developing world cooling off, the World Bank had previously said it expected the global economy to contract but had not provided an estimate. Earlier, it said it expected world output to decline by 1.7 percent. And while the bank said growth should resume next year, it might not be robust.
In a separate report released on March 31, the Organization for Economic Cooperation and Development, which includes the United States and other industrialized powers, said it estimated that the economies of its 30 member countries would shrink by an average of 4.3 percent this year. The OECD predicted that global trade would shrink by more than 13 percent this year.

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28.02.2009 15:09 World Economy Review - February 2009

According to the United Nations baseline forecast, world gross product (WGP) is expected to slow to about 1.0 per cent in 2009, a sharp deceleration from the 2.5% growth estimated for 2008 and well below the more robust growth in previous years. The baseline forecast assumes that it will take six to nine months for financial markets in developed countries to return to normalcy, assuming central banks in the United States, Europe and Japan provide further monetary stimulus from the end of 2008 and on into 2009.
Uncertainties surrounding this forecast are high, as shown by the confidence interval around the baseline forecast. In a more pessimistic scenario, both the fire sale of financial assets and the credit crunch would last longer, while monetary stimulus would prove ineffective in the short run and fiscal stimulus would turn out to be too little, too late. This would then lead to worldwide recession in 2009, with global output falling by 0.4%, and postpone recovery to, at best, the following year. In a more optimistic scenario, a large-scale fiscal stimulus coordinated among major economies would stave off the worst of the crisis, yet - for the reasons indicated - it would not prevent a significant slowdown of the global economy in 2009.
Meanwhile, gross domestic product (GDP) in the OECD area fell by 1.5% in the fourth quarter of 2008 - the largest fall since OECD records began in 1960, according to preliminary estimates. In the US, GDP fell 1% in the fourth quarter of 2008, following a 0.1% decrease in the previous quarter. Japan`s GDP declined by 3.3%, following a 0.6% decrease in the previous quarter. GDP in the Euro area was down 1.5%, following a 0.2% fall in the previous quarter.
The US contributed 0.1% to the total OECD fall of 1.1% between the fourth quarter of 2007 and the fourth quarter of 2008. Japan contributed 0.5%, the Euro area (12 countries) 0.3%, and the remaining countries 0.2%.

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01.02.2009 17:50 World Economy Review - January 2009

With overall global economic growth slowing to a near standstill this year, 2009 will be the most challenging year for economies across the globe since World War II, according to an International Monetary Fund report released Jan 28.
The IMF, a global economic organization of 185 countries, said economic growth across the world will fall to just 0.5% in 2009 from 3.4% in 2008. Financial markets are expected to remain under stress - despite a cornucopia of credit-easing actions - until investors and consumers gain confidence that policy actions can help improve market conditions.
In advanced countries, including the United States, the euro-zone nations, Japan, Canada and the United Kingdom, gross domestic product is expected to shrink by 2%. IMF said a vicious cycle of plummeting asset values, decreasing household wealth and sinking consumer demand will result in the first contraction of total advanced economies` GDP in the post-World War II era.
Even booming emerging and developing economies are feeling the pains of the global recession. China, India, the Middle East and Brazil will grow a combined 3.25% in 2009, down considerably from 6.25% growth last year. Falling export demand, lower commodity prices and financial constraints will lead to the slowdown.
IMF said the global downturn won`t last too much longer, as 2010 should be much better. An anticipated recovery of the U.S. housing market in late 2009 should help support a recovery in the United States, and coordinated, sweeping financial market stimulus actions will help advanced economies grow 1.1% next year, according to IMF predictions.
For emerging economies, a stronger economic framework developed in recent years will help them avoid the shock of serious, painful declines of past recessions. Developing economies, too, are better prepared to deal with the current recession than in than in years past, though high poverty levels and reliance on commodity exports will still sting throughout the downturn, said the report. To help reverse the economy`s course, several nations around the world with advanced economies have enacted fiscal stimulus plans, which could cost as much as 1.5% of advanced economies` GDP in 2009. The United States is currently considering a plan that would equal roughly 6% of its total economic output. The actions of those countries are expected to increase their debt levels to 7% of their GDP, up from 3.75% in 2008.
But the IMF said stimulus packages may not be enough. Countries around the globe should consider strong and complementary policy actions that help to fix the financial sector meltdown. IMF recommended a massive coordinated effort to buy up troubled assets, a policy that has received much attention in advanced economies but wavering support in recent months.

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02.01.2009 12:24 World Economy Review - December 2008

In Washington, the Institute of International Finance, an association of world financial institutions, has issued a grim economic forecast, saying that all of the major economies are weak or in recession. The institute says global growth in 2009 will be negative for the first time since reliable statistics became available in 1960. Growth is projected to be minus four-tenths of one percent, compared to 2008 growth of nearly two percent.
Steep declines in real gross domestic product are likely in the current quarter and in the next quarter in the United States, the Euro-zone countries and in Japan. Overall, 2009 will see falls in output in these countries and rising unemployment, but a revival of growth may start in the late summer of next year, forecast the economists at the Institute of International Finance. World GDP is expected to decline for the first time in recent history in 2009 with a projected fall of 0.4 percent, after a 2 percent gain this year, report says.
The IIF forecast that the U.S. economy will decline by 1.3 percent next year after an advance of 1.2 percent this year, while the Euro Area economies fall by 1.5 percent in 2009 after a 0.9 percent drop in 2008, and Japan`s economy falls by 1.2 percent next year after zero growth this year. The IIF predicted further slowing in the leading emerging market economies, although their average growth rate in 2009 at 3.1 percent, after 5.9 percent in 2008, will exceed that of the mature economies by some 5 percentage points. Particularly weak growth is seen in central, eastern and southern Europe with growth of just 0.3 percent likely for 2009 after 4.5 percent in 2008.
Stronger growth is seen in Asia/Pacific, yet here too there is a significant slowing with growth in the region as a whole seen at 5.7 percent after 7.4 percent in 2008 the forecasts include growth for China in 2009 of 6.5 percent after 9.3 percent this year, and a slowing of India`s growth to 5 percent from 6.2 percent last year.
Meanwhile, according to a report released by the World Bank, world GDP growth will be 2.5 percent in 2008 and 0.9 percent for 2009. HSBC is even gloomier about the global economy, expecting it to contract by 0.1% next year.

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01.12.2008 21:50 World Economy Review - November 2008

Many advanced economies are in or nearing recessions of a magnitude not experienced since the early 1980s, the Organization for Economic Cooperation and Development warned November 25th as it called for aggressive economic stimulus measures. The developed economies face a protracted recession and a sharp increase in unemployment, the OECD said in its twice-yearly Economic Outlook.
The organization projected that member economies would decline in 2009 by 0.4 percent over all, after growth of 1.4 percent this year. It forecast that growth would return in 2010, with advanced economies growing a combined 1.5 percent. The OECD also called on governments to take aggressive fiscal policy measures, as "current conditions of extreme financial stress have weakened the monetary transmission mechanism." But it warned that once a recovery starts to take hold, governments must "begin promptly to unwind the macroeconomic stimulus in place to prevent inflationary pressures from gaining a foothold."
The OECD said that the U.S. economy would shrink 0.9 percent next year, after posting growth of 1.8 percent this year. The economy will grow 1.6 percent in 2010, the organization said. The euro zone economy will contract next year by 0.6 percent, after a 3.4 percent increase in 2008, the organization said, with 1.3 percent growth in 2010. The organization warned that the housing market decline in European markets appeared to have further to go.
Growth in Japan will remain just positive, rising 0.3 percent next year, after 1.4 percent growth this year, the OECD said, but the economy will shrink 0.1 percent in 2010. It warned that "with persistent economic slack and anemic wage growth," deflation could return to Japan by mid-2009. The organization said the economic downturn would also be severe in Britain, Hungary, Iceland, Ireland, Luxembourg, Spain and Turkey.
The organization said its forecasts were based on the assumption that "the extreme financial stress since mid-September will be short-lived, but will be followed by an extended period of financial headwinds through late 2009, with a gradual normalization thereafter," and that exchange rates and the oil price remain at their recent levels. It said the main downside risks included the possibility that financial markets would remain under pressure, that more financial institutions might fail and a chance that emerging market economies would be hit harder.

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