A Widely Shared World Recession

April 27, 2009

Newly revised IMF forecasts project a 1.3% contraction of world GDP in 2009 followed by a 1.9% recovery in 2010.  Growth over the four years to 2010 amounts to just 2.2% per annum in spite of a 5.2% rise of GDP in the first year of that period.  All of the net growth in between 2006 and 2010 originates in either emerging or developing economies, which collectively are projected to post per annum growth of 5.0%.  Growth among advanced nations amounts to negative 0.1% over the four years.  A breakdown of the advanced economies underscores the simultaneity of the recession.  According to the IMF forecasts for 2009-10, growth over the four years to 2010 is topped by Canada and the newly industrialized Asian economies at 0.5% per annum, followed by the United States at +0.1% per annum, Britain at -0.2% per annum, Euroland at -0.3% per annum and Japan at -1.0% per annum.

The IMF forecasts may not be low enough.  Those projections assume that the financial sector mends and that governments sustain sufficient fiscal and monetary stimulus.  The forecasts also assume no further mega-shock.  Implicit in that assumption is the view that the swine flu scare is contained and does not mushroom into a full pandemic.  Currency analysts continue to devote considerable energy to differentiating the business cycles of major advanced economies.  The IMF figures suggest that the ebb and flow of risk aversion will continue to influence currency movements more keenly than relative growth and monetary policy cycles.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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