IMF predicts major global slowdown amid financial crisis

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Nadine Mather and Chloë Loubser

According to the International Monetary Fund, the present economic crisis is on such a scale that even advanced economies are expected to go through a period of extremely sluggish growth or contraction in 2008 and the first half of 2009, and experience only a modest upturn in the latter part of the year.

• World growth will slow amid most dangerous financial shock since 1930s
• No growth in many advanced economies until at least mid-2009
• Global economy expected to stage modest recovery later in 2009

The world economy is decelerating quickly—buffeted by an extraordinary financial shock and by still-high energy and commodity prices—and many advanced economies are close to or moving into recession, the IMF says in its latest World Economic Outlook (WEO).

The October 2008 report, which was released two days prior to the IMF-World Bank Annual Meetings in Washington, said that growth in emerging economies is also weakening after years of strong growth, though it will still drive global growth.

Speaking at the WEO press conference, IMF Chief Economist Olivier Blanchard emphasized the importance of implementing joint financial and macroeconomic policies at this point "to stem the negative momentum on multiple fronts." On the financial side, "this implies the design of comprehensive programs to deal with systemic problems," while on the macroeconomic side, "this implies the use of monetary and fiscal policies to support growth and break negative feedback loops between the financial and real sectors," he said.

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