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Wednesday, 11 March 2009

Global economy could contract in 2009: IMF

DAR ES SALAAM, March 10, 2009 (AFP) - - The global economy could contract for the first time in 60 years in 2009, International Monetary Fund Managing Director Dominique Strauss-Kahn warned on Tuesday.

"The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes," he said at the opening of a conference in Tanzania on the impact of the world financial crisis on Africa.

"Continued de-leveraging by world financial institutions, combined with a collapse in consumer and business confidence is depressing domestic demand across the world," Strauss-Kahn said.

Strauss-Kahn said last month that he expected zero global growth in 2009 and his institution released data that included a 0.5 percent growth forecast the month before that.

But as the crisis deepens, the IMF chief said, the latest projections being compiled would probably show the first global contraction in six decades.

"When we release our next package of forecasts at the spring session, that is to say in April, everything leads us to believe that it will indeed reveal a negative global growth for the first time in 60 years," he told reporters.

He revealed last week he saw no chance of a global recovery before 2010.

"Even though the crisis has been slow in reaching Africa's shores, we all know that it's coming and its impact will be severe," Strauss-Kahn said.

"And the threat is not only economic, there is a real risk that millions will be thrown back into poverty," he added.

The IMF has suffered from a massive shortfall in funds to address the crisis but Strauss-Kahn voiced confidence that the planned doubling of the institution's resources would be achieved at a G20 summit in London next month.

He said he had received several commitments, including one for 100 billion dollars by Japan.

"Last week, European leaders met in Berlin and decided to commit themselves to go in the same direction. I have also had some discussions with some other members so I am confident that by the time of the summit in April, the doubling of the resources of the IMF will be achieved," he said.

The IMF's sister organisation, the World Bank, also warned in a study Sunday that the global economy could shrink this year for the first time since World War II and that developing countries faced a shortfall of 270 to 700 billion dollars.

The shortfall comes "as private sector creditors shun emerging markets, and only one quarter of the most vulnerable countries have the resources to prevent a rise in poverty," the World Bank said in statement.

"We need to react in real time to a growing crisis that is hurting people in developing countries," said World Bank Group president Robert Zoellick.

"This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis."

Zoellick, who in February called for a fund to which each developed country would contribute 0.7 percent of its stimulus package to help poorer countries, urged more investment in safety nets, infrastructure, and small- and medium-sized companies.

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