HOT OFF THE PRESS from IMF:
Quote:
World Growth Grinds to Virtual Halt, IMF Urges Decisive Global Policy Response
IMF Survey online
January 28, 2009
* IMF revises world growth down to lowest rate since World War II
* Stresses need for stronger international policy response to the crisis
* Banking sector must be unclogged to get economies moving again
World growth is forecast to fall to its lowest level since World War II, with financial markets remaining under stress and the global economy taking a sharp turn for the worse, sending both global output and trade plummeting, the IMF said in its latest assessment of the world economy.
"We now expect the global economy to come to a virtual halt," said IMF Chief Economist Olivier Blanchard in prepared remarks for a press briefing.
World growth is projected to fall to just ½ percent in 2009, its lowest rate in 60 years, the IMF said in an Update to its World Economic Outlook, released on January 28 together with an update to its Global Financial Stability Report. For projections, see table below.
Despite wide-ranging policy actions by governments and central banks around the world, financial strains remain acute, pulling down the real economy. The Update echoed comments by IMF Managing Director Dominique Strauss-Kahn that a sustained economic recovery will not be possible until the banking sector is restructured and credit markets are unclogged.
New policy initiatives needed
"For this purpose, new policy initiatives are needed to produce credible loan loss recognition; sort financial companies according to their medium-run viability; and provide public support to viable institutions by injecting capital, and carving out bad assets, including possibly through a "bad bank" approach," the Update stressed.
"We think that more decisive action is needed now by both policymakers and market participants, and with greater emphasis on balance sheet cleansing," said Jaime Caruana, Financial Counsellor of the IMF.
Caruana: Bank balance sheets need to be cleaned up to improve confidence
The IMF has raised its estimate of the potential deterioration in U.S. originated credit assets held by banks and others from $1.4 trillion last October to $2.2 trillion now [see related story].
Monetary and fiscal policies need to become even more supportive of aggregate demand and sustain this stance over the foreseeable future, while developing strategies to ensure long-term fiscal sustainability. Moreover, international cooperation will be critical in designing and implementing these policies in order to avoid destabilizing distortions.
keep reading at IMF website
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btw, can't find the article (just got the paper so maybe they'll publish it later) but they also predict the loss of 50,000,000 jobs around the world. The good news is IMF never, ever in its existence had an accurate prognosis so all analysts take their 'predictions' with a grain of salt. The bad news is their predictions always tend to be very optimistic for US, Japan and Europe (after all they're the owners) and pessimistic about emerging markets, so if they say US will have a 1.3% retraction you can expect it to be at least 50% higher than that.