IMF says advanced economies to “contract sharply”

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The IMF and World Bank continue to play leap-frog in reducing their global growth forecasts.

In January, the IMF forecast growth would come to a “virtual standstill”. Then, two weeks ago, the World Bank said the economy would “shrink” for the first time since World War 2.

Today, the IMF joins the Bank in suggesting growth will contract by 0.5% – 1% in 2009. It has also cut its regional forecasts very sharply:

USA growth will be -2.6%, down from -1.5%
Euro area growth will be -3.2%, down from -2%
Japanese growth will be -5.8%, down from -2.6%
Emerging economy growth will be just 1.5%-2.5%, versus 5% plus

The Fund pessimistically now expects the world’s advanced economies to “contract sharply in 2009″. It adds that: “Turning around global growth will depend critically on more concerted policy actions to stabilize financial conditions as well as sustained strong policy support to bolster demand.”

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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