IMF: global economic turnaround will be gradual

The world economy is projected to decline by 1.3 percent this year and will recover only gradually in 2010, according to a new report Wednesday from the International Monetary Fund.

"Achieving this turnaround will depend on stepping up efforts to heal the financial sector, while continuing to support demand with monetary and fiscal easing," the IMF said in its latest World Economic Outlook report.

The IMF said what it calls the deepest global downturn since the Great Depression was caused "by a massive financial crisis and acute loss of confidence."

"All corners of the globe are being affected," the IMF said.

According to the report, the world economy was expected to improve only gradually in 2010, growing by 1.9 percent.

The world's developed economies experienced an unprecedented 7.5-percent decline in real GDP during the fourth quarter of 2008,and output was estimated to have continued to fall almost as fast during the first quarter of 2009, the IMF report said.

The U.S. economy may have suffered most from intensified financial strains and a continued fall in the housing sector. But western Europe and Asia have been hit hard by a collapse in global trade. Countries in those regions also have rising financial problems of their own and housing corrections in some national markets.

Emerging economies, meanwhile, are suffering badly and contracted 4 percent in the fourth quarter.

The United States economy was expected to contract 2.8 percent this year, the IMF said.

Meanwhile, the euro zone economy was expected to shrink 4.2 percent this year and fall an additional 0.4 percent in 2010, the IMF said.

In Japan, the IMF expects 2009 output to fall 6.2 percent, far worse than its January forecast for a 2.6-percent decline.

China was expected to slow to about 6.5 percent growth this year, half the 13 percent growth rate recorded pre-crisis in 2007 but still a strong performance given the global context, the IMF said.

The IMF warned the financial crisis remains acute. "The financial market stabilization will take longer than previously envisaged, even with strong efforts by policymakers," it said.

Meanwhile, emerging and developing economies are expected to face greatly curtailed access to external financing in both years.

In a semi-annual report Global Financial Stability Report, which was released Monday, the IMF said write-downs on U.S.-originated assets to be suffered by all holders will be 2.7 trillion dollars, "largely as a result of the worsening base-case scenario for economic growth."

Total expected write-downs on global exposures are estimated at about 4 trillion dollars, of which two-thirds will fall on banks and the remainder on insurance companies, pension funds, hedge funds, and other intermediaries.

The crisis has hurt international trade, with volume expected to plunge 11 percent this year before eking out 0.6 percent growth in 2010.

Consumer prices in developed countries were under pressure and were expected to fall 0.2 percent in 2009.

The IMF also called for its members to take new bold policy stimulus to jump-start their economies.

"This difficult and uncertain outlook argues for forceful action on both the financial and macroeconomic policy fronts," said the IMF.

The 185-member organization also warned against rising protectionism.(XINHUA)