Global economy: 2009 just like World War II

International Monetary Fund says world economic growth will fall to 0.5% in 2009, the lowest rate in more than 60 years.

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By David Goldman, staff writer

What is hurting you the most?
  • Housing meltdown and foreclosures
  • Job cuts and unemployment
  • Cutbacks in government services

NEW YORK ( -- With overall global economic growth slowing to a near standstill this year, 2009 will be the most challenging year for economies across the globe since World War II, according to an International Monetary Fund report released Wednesday.

The IMF, a global economic organization of 185 countries, said economic growth across the world will fall to just 0.5% in 2009 from 3.4% in 2008. Financial markets are expected to remain under stress - despite a cornucopia of credit-easing actions - until investors and consumers gain confidence that policy actions can help improve market conditions.

In advanced countries, including the United States, the euro-zone nations, Japan, Canada and the United Kingdom, gross domestic product is expected to shrink by 2%. IMF said a vicious cycle of plummeting asset values, decreasing household wealth and sinking consumer demand will result in the first contraction of total advanced economies' GDP in the post-World War II era.

Even booming emerging and developing economies are feeling the pains of the global recession. China, India, the Middle East and Brazil will grow a combined 3.25% in 2009, down considerably from 6.25% growth last year. Falling export demand, lower commodity prices and financial constraints will lead to the slowdown.

IMF said the global downturn won't last too much longer, as 2010 should be much better. An anticipated recovery of the U.S. housing market in late 2009 should help support a recovery in the United States, and coordinated, sweeping financial market stimulus actions will help advanced economies grow 1.1% next year, according to IMF predictions.

For emerging economies, a stronger economic framework developed in recent years will help them avoid the shock of serious, painful declines of past recessions. Developing economies, too, are better prepared to deal with the current recession than in than in years past, though high poverty levels and reliance on commodity exports will still sting throughout the downturn, said the report.

To help reverse the economy's course, several nations around the world with advanced economies have enacted fiscal stimulus plans, which could cost as much as 1.5% of advanced economies' GDP in 2009. The United States is currently considering a plan that would equal roughly 6% of its total economic output. The actions of those countries are expected to increase their debt levels to 7% of their GDP, up from 3.75% in 2008.

But the IMF said stimulus packages may not be enough. Countries around the globe should consider strong and complementary policy actions that help to fix the financial sector meltdown. IMF recommended a massive coordinated effort to buy up troubled assets, a policy that has received much attention in advanced economies but wavering support in recent months. To top of page

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