The International Monetary Fund (IMF) on Thursday lowered its forecasts for the global economy faced with an intensifying credit crisis, predicting that a global recession will occur in 2009.
In its updated World Economic Outlook, the IMF announced today that global growth in 2009 will slow to 2.2 percent, compared to the 3.0 percent growth forecasted in October. A global economic growth rate below 3.0 percent is considered a global recession. The United States, the world’s largest economy, will see a decline in activity of 0.7 percent next year, while the eurozone economy will contract by 0.5 percent. Previously, the IMF had expected growth in economic activity in the U.S. in 2009 of 0.1 percent, and in the eurozone of 0.2 percent.
Developed economies as a whole will shrink by 0.3 percent, compared to a previously expected growth of 0.5 percent. In contrast, developing and emerging economies will continue to lead global growth, with a growth rate of 5.1 percent. However, this represents a slowdown from the 6.1 percent forecasted in the October report. The global financial crisis has severely impacted the availability of credit worldwide, reducing consumption in wealthy countries and limiting access to foreign investment for poorer nations.
"There is a sharp deterioration in credit conditions for developing countries," stated IMF chief economist Olivier Blanchard. The IMF also predicts a sharp slowdown in the growth of Eastern European economies in 2009, from a previously estimated 3.4 percent to 2.5 percent, and for Russia and its neighbors, from 5.5 percent to 3.5 percent. (Hina)
