The International Monetary Fund (IMF) will cut its 2009 global growth forecast again, this time to between 1% and 1.5%, as economic conditions deteriorate further, an IMF official said.
The IMF's most recent forecast, made in November, was for growth of 2.2%. Since then, economic indicators have deteriorated to their worst levels in decades, with many of the world's biggest industrial economies in recession.
“It will be revised to 1 to 1.5% in 2009, which is huge,” Axel Bertuch-Samuels, deputy director of the IMF's monetary and capital markets department, told Reuters on the sidelines of a conference in the United Arab Emirates.
“Global economic prospects have deteriorated in recent months, consumer and business confidence have dropped to levels that we have not seen in decades, and activity too has dropped sharply,” he said.
The 2009 year will be enormously challenging for the world's economy, Bertuch-Samuels said.
Economists are bracing for the worst downturn since World War Two as most of Europe follows the US into a recession triggered by the financial crisis that has battered markets and virtually paralyzed lending.
Governments have announced bank rescue and stimulus packages worth hundreds of billions of dollars, and G7 central banks have cut benchmark interest rates ever closer to zero, but that has still not been enough to turn the tide.
In November, the IMF had cut projections for world growth in 2009 by 0.8 percentage points to 2.2% from an October forecast.
An official release of updated IMF economic forecasts is expected on Wednesday, he said, and even forecasts for emerging markets such as China and India will see downward revisions.
The IMF, for example, sees economic growth in the energy exporting Gulf Arab states cooling to 5.1% in 2009 compared with around 7% in 2008, and that could be cut again, said Saade Chami, an IMF coordinator in Lebanon, at the conference in Abu Dhabi.
In October, the IMF had forecast economic growth for the Gulf Arab region of 6.6% in 2009, up from 7.1% in 2008. (Reuters)