"Global economy is in a severe recession inflicted by a massive crisis and acute loss of confidence," the International Monetary Fund (IMF) said in its semiannual World Economic Outlook (WEO) report, which was released on Wednesday, April 22.
The global economy will contract 1.3 percent this year, 1.8 percentage points lower than January's forecast, the IMF noted in its semiannual Global Financial Stability Report (GFSR), and this was the third time the IMF has slashed its 2009 world growth estimate this year.
World economy in 2010 will resume gradually and is expected to post a real 1.9-percent growth, 1.1 percentage points lower than the related figure forecasted in January of 2009. This represents "by far the deepest recession since the end of World War II in 1945, IMF noted.
Global economic growth has all been contributed by the newly emerged economies and developing countries. The IMF now expects G-20 GDP to contact 3.8 percent in 2009, with the U.S. economy declining 2.8 percent. The prospects for the advanced economies, including the American economy, are not much brighter in 2010, with an overall forecast of zero growth.
The emerging economies and developing countries will record a positive growth of 1.6 percent and 4 percent respectively in 2009 and 2010. Growth in China, where the IMF said there is scope for further easing of monetary and fiscal policy, is forecast to slow to 6.5 percent this year before climbing to 7.5 percent in 2010, the highest growth rate among all nations in the world.
Moreover, IMF's semiannual outlook report has also increased write-downs on U.S.-originated assets to 2.7 trillion US dollars from the estimated 2.2 trillion dollars in January 2009, according to the IMF report released on April 21. In this regard, banks will take the brunt of that cost, around two-thirds.
Banks all over the world remain reluctant to lend money to each other and or to other borrowers, and the total amount of money loaned to private firms in developed economies would definitely decrease in 2009 and 2010.
For the recapitalization of banks by their governments, the banking systems in the United States would possibly require 275 billion to 500 billion dollars, according to estimates made by the IMF's "Global Financial Stability Report", and the banking systems in whole Europe (excluding Britain) would require 475 billion to 950 billion dollars, and the banking systems in Britain would need 125 billion to 250 billion dollars.
Against this background, the IMF's semiannual World Economic Outlook report said that a stronger macroeconomic policy support would continue and sustain. If G20 stimulus measures total 2 percent of GDP in 2009, they will amount to 1.5 percent of GDP in 2010, IMF report predicted, and fiscal deficits in both advanced and developing economies will expand drastically.
Ample experience so far accumulated has given an eloquent proof that the fiscal policy, in particular, appears to be especially helpful during recessions associated with financial crisis. Fiscal stimulus package are needed to remain and even to increase at least until 2010 on the basis of earlier massive fiscal stimulus packages introduced in 2009.
Varied difficulties for global economy and vague, ambiguous economic prospects call for useful measures to be taken in the sphere of fiscal and macroeconomic policies, the IMF semi-annual report suggested. The financial crises of the past have proven that a delay in dealing with key economic issues would simply mean the longer carry-back period with even much heavier costs during future recession, the report added.
Aid for trade and financial partners is of utmost importance, as it facilitates proping up the global demand and will benefit the parties concerned. On the contrary, trade and financial protectionism will only inflict heavy losses upon all relevant parties as well as people's life and property. The "bitter experiences" of the 1930s with the vicious practice of "benefiting oneself at the expense of others" have provided a crystal-clear admonishment to all nations.
By People's Daily Online and contributed by PD resident reporter in U.S. Ma Xiaoning
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