Global economy: 2009 just like World War II
NEW YORK (CNNMoney.com) - 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 Wednesday.
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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