Magazine article Economic Trends

Weaker Still

Magazine article Economic Trends

Weaker Still

Article excerpt



With world trade and industrial production falling precipitously, the International Monetary Fund has again pared its forecast for global economic growth. The agency now expects world economic activity to expand by only 0.5 percent in 2009, the slowest growth rate since World War II. The agency believes that economic activity will pick up in 2010, but only to a paltry 3.0 percent. The outlook is highly uncertain with risks clearly to the downside.

Output among the advanced economies is likely to contract by 2 percent in 2009, another post-World War II first. All of the large developed countries are likely to experience a contraction this year but return to growth in 2010. The IMF now estimates that the cumulative output shortfalls from potential between 2008 and 2010 will be on par with those sustained in the 1974-75 and 1980-83 recessions.

With worldwide export demand falling, with lower commodity prices, and with financial conditions substantially tighter, emerging and developing countries are feeling the pinch. These countries came into the current economic malaise in a substantially stronger position than in the past. Consequently, their growth rates are likely to remain above levels reached during previous worldwide recessions. The IMF expects economic growth among the emerging and developing countries to slow to 3.3 percent in 2009 and 5.0 percent in 2010.

The IMF sees the deteriorating economic situation as a continuing problem in credit markets. …

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