World growth in '09 to fall to lowest rate since World War II - IMF

28 January 2009 15:28  [Source: ICIS news]

LONDON (ICIS news)--World growth is projected to fall to 0.5% in 2009, its lowest rate since World War II, and a recovery will not be possible until the financial sector’s functionality is restored, the International Monetary Fund (IMF) said on Wednesday.

Global growth in 2009 is expected to fall to 0.5% when measured in terms of purchasing power parity and to turn negative when measured in terms of market exchange rates, it said, adding that this represented a downward revision of about 1.75 percentage points from the organisation’s November 2008 update.

“Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy,” the IMF said.

“Helped by continued efforts to ease credit strains as well as expansionary fiscal and monetary policies, the global economy is projected to experience a gradual recovery in 2010, with growth picking up to 3%,” it said.

However, it said the outlook was highly uncertain, and the timing and pace of the recovery would depend critically on strong policy actions.

Output in the advanced economies was expected to contract by 2% in 2009, the first annual contraction during the post-war period, with a cumulative output loss comparable to the 1974-1975 and 1980-1982 periods.

The IMF said output was expected to start recovering in late 2009 and rise by about 1% in 2010.

Growth in emerging and developing economies was expected to slow sharply to 3.25% in 2009 from 6.25% in 2008, due to falling demand, lower commodity prices, and much tighter external financing constraints.

The IMF's baseline petroleum price projection was also revised down to $50/bbl for 2009 and $60/bbl for 2010, from $68 and $78 respectively, the organisation said.

Limited growth was expected to impact inflation, with an expected decline in the advanced economies to a record low 0.25% in 2009 from 3.5% in 2008, before edging up to 0.75% in 2010.

In emerging and developing economies, inflation was expected to subside to 5.75% in 2009 and 5% in 2010, down from 9.5% in 2008.

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By: Hilde Ovrebekk
+44 20 8652 3214

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