The global economic outlook is worsening and the IMF is likely to cut its growth forecasts sharply, although Germany’s stimulus package announced on Tuesday offers some hope, IMF Managing Director Dominique Strauss-Kahn said on Tuesday.
Speaking in Budapest, Strauss-Kahn said the global economy is slowing more than the IMF had previously expected and this has implications for several central and eastern European economies. Germany on Tuesday detailed its second stimulus package in as many months as grim data from China and Japan highlighted the scale of the crisis and President-elect Barack Obama sought approval to unlock the second half of a $700 billion US package.
“Even if I don’t have the precise figures now, I already know (the new forecasts) will show sharp decreases for estimates we have for global growth,” Strauss-Kahn told Reuters. “I’m concerned about the fact that the world, the global economy is slowing down even more than has been the case a few months ago,” said Strauss-Kahn.
Strauss-Kahn welcomed Germany’s €50 billion fiscal stimulus package but said he needed more time and detail to make a fair evaluation. “Of course, the new German plan, which comes on top of the rest, makes (us) more comfortable. I have to see more detail of the plans,” he said. “Obviously, it’s a strong effort made by the German government and it will be very helpful.”
In November, the IMF cut its projections for world growth in 2009 to 2.2% -- down 0.8 percentage points from an October forecast -- and predicted industrialized economies were headed for the first full-year contraction since World War Two. Strauss-Kahn said he saw some room for monetary easing in Europe. “Obviously there’s some room in Europe but as you know, the European Central Bank is much more concerned about inflation than other central banks -… so I can understand that for now, the ECB has been more cautious,” he said. (Reuters)