The Housing Chronicles Blog: World economy still in severe recession

Wednesday, April 22, 2009

World economy still in severe recession

Although there have certainly been some kernels of promising information lately about the housing market and economy, the fact is the most significant world-wide slowdown since WWII remains in a severe recession. From a Reuters story via Yahoo! Finance:

The International Monetary Fund on Wednesday slashed growth forecasts for every major country and urged governments to take forceful action to ensure the world economy's recovery from a severe recession.

In its latest World Economic Outlook, the IMF said the global economy would likely contract 1.3 percent this year in the deepest post-World War Two recession by far.

Growth is set to re-emerge at a sluggish 1.9 percent next year but the pick-up depends on aggressive measures to repair a poorly functioning financial system...

Just three months ago, the IMF had projected global growth of 0.5 percent, although last month it warned of a deep recession.

The Washington-based institution said it revised its forecasts downward because financial markets appear likely to take longer to stabilize than it had thought earlier...

The IMF said on Tuesday that banks and other financial institutions around the world faced losses which could amount to $4.1 trillion. It said banks would likely need to raise $875 billion in fresh capital.

In offering new economic projections, the IMF said government measures to battle recession should be sustained, if not increased, in 2010, warning that premature withdrawal of stimulus could set back a recovery.

It said interest rates in major advanced economies are likely to be lowered to or remain near zero, and said authorities should move quickly to cut interest rates where there was room for further easing...

The IMF said the United States remains at the epicenter of the crisis, and it said it now expected the U.S. economy to contract 2.8 percent this year.

It said while there were signs the U.S. recession might be easing, a recovery was unlikely to take hold until next year, which would leave 2010 gross domestic product flat...

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