Global recession forecast for 2009

Job seekers wait to submit applications at a job fair in Beijing in March. The IMF projected the global economy will shrink by 1.3 percent this year, boosting homelessness and crime.

Associated Press

Job seekers wait to submit applications at a job fair in Beijing in March. The IMF projected the global economy will shrink by 1.3 percent this year, boosting homelessness and crime.

WASHINGTON — The global economy is expected to lurch into reverse this year for the first time since World War II with appalling consequences for nations large and small — trillions of dollars in lost business, millions of people thrust into hunger and homelessness and crime on the rise.

And the pain won't stop this year, the International Monetary Fund declared Wednesday, for what it said was "by far the deepest global recession since the Great Depression."

To cushion the blow and head off further damage next year, the IMF is calling for more stimulus projects from the world's governments, including major spending for public works projects.

Even with many countries taking bold steps to turn things around, the global economy will shrink 1.3 percent this year, the IMF predicted in its dour forecast.

"We can be fairly confident that in 2010 or even 2011, economies will not be back to normal," said IMF chief economist Olivier Blanchard. "Which means that governments should today basically think at least about contingent plans for infrastructure spending. … Next year will be too late."

In the United States, President Barack Obama's $789 billion stimulus includes money for fixing roads and bridges and other infrastructure projects. IMF officials said there's room for Germany and other countries to do more in terms of fiscal stimulus, and the United States, too, has prodded the Europeans to ramp up efforts.

Without the help of countries' stimulative fiscal policies — such as tax reductions or increased government spending — the blow to the global economy would be even worse, Blanchard said: "We would be in the middle of something very close to a depression."

"By any measure," the downturn is the deepest since the Great Depression of the 1930s, the IMF said in its latest World Economic Outlook. "All corners of the globe are being affected."

All told, lost output worldwide could reach as high as $4 trillion this year alone, U.S. Treasury Secretary Timothy Geithner estimated in a speech Wednesday.

"The world economy is going through the most severe crisis in generations," he said. "We each face somewhat different challenges and thus are not all in the same boat. But we are all in the same storm."

Geithner did not mention any further commitments the United States might seek on Friday at meetings with other economic powers or during weekend meetings of the IMF and the World Bank in Washington. Analysts say those discussions are unlikely to produce any further major proposals.

The IMF's outlook for the United States is even bleaker than for the world as a whole: It predicts the American economy will shrink 2.8 percent this year, the biggest decline since 1946.

That's generally in line with the predictions of many U.S. analysts, who expect a figure in the range of 2.5 percent to 3 percent.

Global recession forecast for 2009 04/22/09 [Last modified: Wednesday, April 22, 2009 11:00pm]

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