A BBC News article neatly summarizes the latest International Monetary Fund economic growth forecasts for ‘The Advanced Economies’, ‘The Developing Economies’, the ‘Eurozone’, Japan, the U.S., and the ‘World’ in an easy to read and obvious chart.  The chart shows growth numbers for 2008, and forecasts for each of 2009 and 2010.  The chart is worth reviewing.  In summary, the chart suggests:

•    the world economy is set to shrink by between 0.5% and 1.0% in 2009, the first global contraction in 60 years; and,

•    developed countries will suffer a “deep recession”, which the IMF did not think would be case only 2 months ago.  In a report prepared for the G20 group of finance ministers, the IMF says the world economy viewed as whole will shrink, and says the advanced economies will suffer a decline in output of 3.0% – 3.5% in 2009, and will grow (obviously from a smaller base) by only 0.0% – 0.5% in 2010 (Note:  only two months ago the IMF was predicting slight growth in 2009 – demonstrating how quickly things are changing).

The IMF warns that in the event of further delays in implementing comprehensive policies to stabilise financial conditions, economic conditions could still deteriorate further and the recession will be deeper and more prolonged.  I would have thought the operative word not used in this IMF statement is ‘successfully’.  Implementing policies and plans that prove unsuccessful will do nothing to alleviate the current economic problems, and in fact I believe almost certainly will worsen them.

The article refers to the U.S. government’s plan (to be put forward this coming week) to establish a private-public partnership to buy up U.S.$1 trillion in so-called ‘toxic assets’, I question the viability of such a plan even before seeing it (which even I think is somewhat ridiculous) as I can’t see where the incentive will be for private investors to ‘buy into it’ without government guarantees which, if offered, would be tantamount to the U.S. government simply buying the ‘toxic assets’ directly – see my March 21 blog post.

Finally, the IMF warned of what it sees as a serious risk emerging economies will be unable to secure external finance, as banks and investors in rich countries withdraw their money – with Central and Eastern Europe likely being most effected.

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