IMF Sees ‘Great Recession’ as Global Economy Shrinks

[marketcrazy1]

March 10 (Bloomberg) -- The International Monetary Fund expects the global economy to contract this year and the slump will be the worst “in most of our lifetimes,” Managing Director Dominique Strauss-Kahn said.

The global financial crisis that has slashed international trade can now be termed the “Great Recession,” Strauss-Kahn said in a speech to African central bank governors and finance ministers in Dar es Salaam, Tanzania today.

“The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes,” Strauss- Kahn said. “Continuing deleveraging by world financial institutions, combined with the collapse in consumer and business confidence is depressing domestic demand across the world.”

The IMF had forecast in January that the global economy would expand 0.5 percent this year. The World Bank said in a March 8 report that the international economy was likely to shrink for the first time since World War II, and trade will decline by the most in 80 years.

European governments from Dublin to Athens have committed more than 1.2 trillion euros ($1.5 trillion) to protect their banking systems and leaders pledged to spend a combined 200 billion euros to try and lift their economies out of the worsening slump. The U.S. is spending $787 billion on an economic stimulus package to revive its economy.

IMF Resources

The IMF is aiming to double its resources to $500 billion to better address the crisis, with Japan already pledging an extra $100 billion. Strauss-Kahn said he is “confident” the Group of 20 countries will agree to this goal at a summit in April.

He urged better coordination between leading nations to help boost the global economy and called on rich countries to “reject protectionism, both in trade and finance.”

“If one crisis amongst all crises in the world that requires some coordination, it is this crisis,” Strauss-Kahn said. “It’s a global crisis, so the solution can’t be implemented by one country alone.”

Finance ministers from the 20 largest industrialized and emerging-market economies will meet in London this weekend, as the U.S. tries to push European governments to increase spending to stimulate their economies.

Poor countries may be worst hit by a slump in economic growth and trade because poverty will increase, the IMF managing director said. That increases the threat of political conflict and even war in some regions, he added.

Economic growth of about 3 percent forecast for Sub-Saharan Africa may be “too optimistic” and the global crisis threatens to wipe out economic progress in the world’s poorest continent in the past decade, Strauss-Kahn said.

“We have to be concerned that the remarkable gains achieved by Africa over the last decade are now under threat,” Strauss- Kahn said. “As growth around the world has almost come a halt, demand for Africa’s products is plunging.”

To contact the reporter on this story: Nasreen Seria in Johannesburg at [email protected] McGregor via the Johannesburg bureau at [email protected]
Last Updated: March 10, 2009 05:38 EDT http://www.bloomberg.com/apps/news?pid=20601087&sid=aSlPjPhmvqrY&refer=home

[marmar]

1. Translation = Depression.

IMF weasel words.