(1888PressRelease)
November 17, 2008 - London, Worst hit by the crisis will be the UK, which is expected to contract by 1.3 % in 2009. Impacted by slowing exports, Germany’s contraction is predicted at 0.8 percent. Countries using the Euro currency are likely to shrink by 0.5 percent. The US and Spain are expected to contract by 0.7 percent, respectively, in 2009.
While central banks across are slashing borrowing costs to inject liquidity into flagging economies, more fiscal stimulus is warranted, the Fund said. “Market conditions are starting to respond to these policy actions, but even with their rapid implementation, financial stress is likely to be deeper and more protracted than envisaged (in October)," the IMF said in a statement.
"There is a clear need for additional macroeconomic policy stimulus relative to what has been announced thus far," the IMF added. "Room to ease monetary policy should be exploited."
The IMF projected growth for developing Asian countries at 7.1 percent for 2009, down 0.6 percent from October’s forecast. However, developing Asian countries seem to have weathered the financial crisis better.
"Countries in East Asia -- including China -- generally have suffered smaller markdowns" than other economic powers, the Fund stated. "Their financial situations are typically more robust, they have benefited from improved terms of trade from falling commodity prices, and they have already initiated a shift toward macroeconomic policy easing."
The IMF forecast the world economy to grow at 2.2 percent in 2009, down from its October forecast of 3.0 percent.
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