Battling the worst financial crisis in nearly 70 years, the world economy will brake sharply in 2009, with the United States, Western Europe and Japan in recession. Developing economies in Asia, Africa and the Middle East will experience curtailed growth due to plunging commodity prices and a world trade contraction, but likely will escape the red ink. Evidence of the global slide is still mounting. Manufacturers around the world are under severe strain and laying off hundreds of thousands of workers; banks are failing, triggering a severe credit crunch; home foreclosures are skyrocketing; and auto sales are plummeting, which could push some carmakers into bankruptcy. As a result, consumer confidence and spending have slumped, and business investment is drying up. “Looking at where we are today, the good news, if any, is that we have probably stepped back from the brink of financial catastrophe,” said Olivier Blanchard, chief economist for the International Monetary Fund. Conditions have deteriorated so much since the IMF's semiannual World Economic Outlook was released in October that it issued an update last month cutting its 2009 forecast for developed countries' economies to a drop of 0.3 percent, from 0.5 percent growth in the previous estimate. Such a decline would mark the first contraction in any year since World War II. Overall, the IMF now expects the world economy to grow at a 2.2 percent pace in 2009, down from its October projection of 3 percent. Developing economies are projected to see GDP growth rate at 5 percent, despite diving commodity prices that have hit oil exporters especially hard. The WB's Global Economic Prospects report said last week that global GDP growth will slip from 2.5 percent in 2008 to 0.9 percent in 2009. Developing countries' growth is expected to fall from 7.9 percent in 2008 to 4.5 percent in 2009.
