Given the momentous rally in the stock market, a little bit of pesky reality was introduced by the International Monetary Fund (IMF) this morning.
According to the IMF, The world economy will contract in 2009 for the first time since the Second World War, with every major country suffering a deep recession.
Here’s the latest on the expectations for the current downturn.
From the BBC by Steven Schifferes entitled: “Deeper” recession ahead says IMF
“The global economy is set to decline by 1.3% in 2009, in the first global recession since World War II, the International Monetary Fund (IMF) says.
In January, the IMF had predicted world output would increase by 0.5% in 2009. It now projects that the UK will see its economy shrink by 4.1% in 2009, and by a further 0.4% in 2010.
But other major economies are predicted to shrink even more, with Germany declining by 5.6%, Japan by 6.2%, and Italy by 4.4% in 2009. The prospects for the advanced economies are not much brighter in 2010, with an overall forecast of zero growth.
The IMF says this represents “by far the deepest post-World War II recession” with an actual decline in output in countries making up 75% of the world economy.
Currently, output is falling by an “unprecedented” 7.5% annual rate in the rich countries in the last quarter of 2008, and the IMF expects the same rate of decline in the first quarter of this year.
Only a recovery in developing and emerging market countries will propel the world economy back into positive growth in 2010, albeit at a relatively weak level of 1.9%.
The prospects for world trade are even gloomier, with the IMF now forecasting world trade volumes to decline by 11% in 2009, and barely grow at all in 2010.
At the heart of the crisis is the continuing overhang of losses in the financial sector, which the IMF now estimates at $4tn, four times higher than it projected just one year ago.
And it warns that the current outlook is “exceptionally uncertain, with risks still weighting on the downside.”
It says the main risk is that “policies may be insufficient to arrest the negative feedback between deteriorating financial conditions and weakening economies in the face of limited public support for policy actions.”
The tide rolls on…
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