GENEVA — Despite massive stimulus packages being injected into economies around the world, the global economy is projected to contract for the first time in 60 years in 2009 by 0.5 to 1 percent, an International Monetary Fund report said Thursday.
This story first appeared in the March 20, 2009 issue of WWD. Subscribe Today.
The IMF said major advanced economies will post sharper declines in output of 3 to 3.5 percent and emerging economies will grow by 1.5 to 2.5 percent, while the U.S. is now forecast to contract by 2.6 percent and European Union countries by 3.2 percent.
The revised global projections reflect a marked revision from late January, when the agency expected the global economy overall to expand by 0.5 percent.
“Turning around global growth will depend critically on more concerted policy actions to stabilize financial conditions, as well as sustained strong policy support to bolster demand,” the report said.
Giving an even more dire prediction, Heiner Flassbeck, head of a task force of economists at the United Nations Conference on Trade & Development, said during the release of a report on the global economic crisis that world output could contract by between 1 and 2 percent.
Flassbeck attributed the continued sharp contraction since late last year to the subprime credit crisis having set off a burst of speculation bubbles in the stock, commodity and currency markets.
Supachai Panitchpakdi, UNCTAD secretary general, said the G-20 leaders who meet in London on April 2 need to act fast to increase demand and help rehabilitate global trade and prevent it from dropping off rapidly.
Meanwhile, trade finance experts from major commercial banks and international financial institutions meeting in Geneva under the auspices of the World Trade Organization put the shortfall in trade finance at around $100 billion, up from a $25 billion shortfall in November, sources said.
The same sources said the World Bank and its International Finance Corp. are looking at offering $10 billion to $11 billion in funding during the G-20 summit to boost trade finance liquidity. With governments in rich and emerging nations under heavy pressure to bail out troubled companies, trade experts from the World Bank and the Organization for Economic Cooperation urged countries not to resort to protectionist policies.
A World Bank trade note said that since Nov. 17, G-20 nations have implemented 47 measures to restrict trade, including some in textiles. Argentina imposed nonautomatic licensing requirements on a host of goods, including textiles, shoes and leather goods, while Indonesia ushered in requirements that five categories of goods, including apparel, would be permitted in only five ports and airports.
Moreover, China and India had increased the rebate on the duty drawback system for exporters, it noted.