The IMF has predicted that the world's advanced economies will continue to contract sharply during 2009, with leading economies in the Group of Seven expected to experience the sharpest contraction. In its assessment of the global economy provided for the G-20 meeting last week and published on Friday, the IMF projected that global activity will contract by 0.5 percent to 1 percent in 2009 on an annual average basis. This marks the first such fall in 60 years. The IMF said that in the fourth quarter of 2008, global GDP contracted at an annual rate by 5 percent. Despite the major stimulus packages announced recently by the majority of G-20 advanced and emerging countries - including the United States, China, Germany, India, Russia, and Saudi Arabia - trade volumes have shrunk rapidly, while production and employment data suggest that global activity continues to contract in the first quarter of 2009, IMF said. Despite its gloomy prediction, the IMF did forecast that global growth will stage a moderate recovery in 2010. However, such a recovery will very much depend on the steps taken to stabilize financial conditions, the injection of sizeable fiscal support, a gradual improvement in credit, a bottoming of the US housing market, and sharply lower prices for oil and other major commodities that will offer a cushioning effect. The IMF said the current crisis is partly a “crisis of confidence”, and that global financial and economic conditions could “rebound faster than anticipated if policy measures are credibly strengthened.” “Restoring confidence is key to resolving the crisis, and this calls for tackling problems in the financial sector head on,” it said. Finance chiefs from the G-20 economies emerged from their meeting last week having pledged a “sustained effort” to end the global recession and to cleanse banks of toxic assets. They were preparing for a summit of G-20 leaders in London on April 2.
