World economies to decline in 2009: IMF

Barely 10 days ahead of the Summit of the Group-20 here called by President George Bush, IMF has revised its global economic outlook and forecast that advanced economies would slip into recession next year, while the growth rate of Asian nations would come down.

In its World Outlook Report published today, the International Monetary Fund (IMF) has predicted that the global growth would slow down by 0.2 per cent in 2008 and 0.9 per cent in 2009, thus leaving the revised growth figures at 3.7 per cent for this year and 2.2 per cent for the next.

The outlook is not too different for India as well, since IMF sees the country's economic growth going down to 6.3 per cent, 0.6 per cent less than what it had projected last month, as the financial meltdown envelops the globe.

With special mention to the US economy, the report says that it would contract by as much as 0.7 per cent in 2009, while the Eurozone has been forecast to shrink by half-a-point next year.

For the advanced economies in general, IMF sees a negative growth of 0.3 per cent and 5.1 per cent for the emerging and low-income countries, a full one per cent decrease over its previous projection.

"...the sharp decrease in demand in advanced countries observed in the last few months has lead us to predict a sharper contraction for the end of 2008 and the first half of 2009. Because of the sharp worsening of credit conditions to emerging countries...and lower exports is why we have substantially revised our forecasts for that part of the world," said Economic Counsellor and Director of Research Department of IMF Oliver Blanchard.

Painting a scary picture of world trade, IMF forecast suggests that the global growth in volume of trade in goods and services would slide from 7.2 per cent to 4.6 per cent in 2008 and dip to 2.1 per cent next year.

The world economic growth is likely to slowdown from 5 per cent in 2002 to 3.37 per cent in 2008, while India's economic growth for this year is expected to dip by just 0.1 per cent to 7.8 per cent than what was forecast last month.

As per the IMF projections, India is likely to record an economic growth of 6.6 per cent during October-December against 8.9 per cent in the corresponding period in 2007. "The downward revisions to 2009 real GDP growth projections are somewhat larger in emerging economies, averaging one per cent," the IMF said.

Blanchard said that this was clearly a period of "very high uncertainty" with two downside risks, "Despite the measures taken to address the financial system, we cannot be sure that there are no hidden land mines left in the field. A worsening of the financial crisis would clearly lead to further contraction of activity.

"Another risk, which a number of commentators have mentioned, is sustained deflation. It is an issue to worry about, but we do not give it high probability at this stage." In line with the market development, IMF has revised petroleum price projection from 100 dollar a barrel to 68 dollar a barrel for 2009.

According to IMF projections, the UK will be the worst hit on account of the global crisis and may witness contraction of its economy by 1.3 per cent in 2009. In addition, the advanced countries which will witness negative growth in 2009 include the US, Germany, France, Italy, Spain and Japan.

Source: EconomicTimes