World economy
July 8, 2009
In its updated forecast, the World Economic Outlook, the IMF said the world economy was beginning to stabilize and the recession would come to an end in the second half of this year.
The report marked the first time that the IMF has sounded an optimistic note since the financial crisis struck last October.
"Financial conditions have improved more than expected," the report says, "owing mainly to public intervention, and recent data suggest that the rate of decline in economic activity is moderating, although to varying degrees among regions."
The report, released on Wednesday in time for the G-8 summit in Italy, predicts that the world economy will shrink by 1.4 percent this year, but grow by 2.5 percent in 2010. This compares to a forecast in April of a 1.3 percent contraction in 2009 and growth of 1.9 percent next year.
Global recession not yet over
The report went on to say, however, that "despite these positive signs, the global recession is not over, and the recovery is still expected to be slow, as financial systems remain impaired."
The IMF projected trade volume would plunge by 12.2 percent this year, a sharp 1.2 points more than forecast in its April WEO. Trade would grow 1.0 percent next year, a gain of 0.4 percent from its prior forecast, it said.
The IMF urged policymakers to remain vigilant and supportive until growth resumes and deflationary risks recede.
It also said that concerns about rising government debt levels, as a result of higher government spending to shore up economies, highlight the need for stronger medium-term fiscal policy frameworks.
The IMF stressed that the world's economies now needed to begin thinking about rebuilding their financial balances to ensure that sustainable debt loads can be maintained after economic growth has been solidified.
gb/AFP/dpa/Reuters
Editor: Chuck Penfold