World economy to shrink in Great Recession: IMF
The Financial Express, March 11, 2009, Page 1
Agencies
The International Monetary Fund (IMF) 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 on Tuesday.
“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% 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 US is spending $787 billion on an economic stimulus package to revive its economy.
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.” Poor countries may be worst hit by a slump in economic growth and trade because poverty will increase, the IMF managing director said.
Our Bureau adds: Slowing growth of the world economy will impact India, too. An Axis Bank report on inflation trends released on Monday shows that wholesale price index-based inflation would touch zero per cent by April. This will be a first for the Indian economy in the past 60 years. The low inflation will occur due to the cuts in excise duty, the strong base effect of a high inflation a year ago, plus the impact of a cut in fuel prices. From a peak of 12.82% last year, WPI-based inflation eased to 3.03 % at the end of February 21.
Author of the note, Saugata Bhattacharya, said a revival in demand is unlikely to be strong and inflation could dip further into the negative zone in April--meaning prices at the wholesale level for a range of commodities would start falling, a rarity in India.
However, consumer price index inflation, which is more representative of prices in the household consumption basket, continues to be higher. But those, too, are expected to come off a high as cuts in retail petrol, diesel and LPG prices with effect from January 31 and the 2% services tax cut announced in February 24 “are likely to be reflected in CPI inflation going forward”, the note adds.
The Financial Express, March 11, 2009, Page 1
Agencies
The International Monetary Fund (IMF) 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 on Tuesday.
“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% 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 US is spending $787 billion on an economic stimulus package to revive its economy.
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.” Poor countries may be worst hit by a slump in economic growth and trade because poverty will increase, the IMF managing director said.
Our Bureau adds: Slowing growth of the world economy will impact India, too. An Axis Bank report on inflation trends released on Monday shows that wholesale price index-based inflation would touch zero per cent by April. This will be a first for the Indian economy in the past 60 years. The low inflation will occur due to the cuts in excise duty, the strong base effect of a high inflation a year ago, plus the impact of a cut in fuel prices. From a peak of 12.82% last year, WPI-based inflation eased to 3.03 % at the end of February 21.
Author of the note, Saugata Bhattacharya, said a revival in demand is unlikely to be strong and inflation could dip further into the negative zone in April--meaning prices at the wholesale level for a range of commodities would start falling, a rarity in India.
However, consumer price index inflation, which is more representative of prices in the household consumption basket, continues to be higher. But those, too, are expected to come off a high as cuts in retail petrol, diesel and LPG prices with effect from January 31 and the 2% services tax cut announced in February 24 “are likely to be reflected in CPI inflation going forward”, the note adds.
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