Wednesday, March 11, 2009

Global economy to contract in 'Great Recession' – IMF

By Reuters - 10/03/2009

The world economy is likely to shrink to "below zero" this year, in what many are now referring to as the "Great Recession", the head of the International Monetary Fund said on Tuesday.

"The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes," IMF Managing Director Dominique Strauss-Kahn told African political and financial leaders in the Tanzanian capital.

"Continued de-leveraging by world financial institutions, combined with a collapse in consumer and business confidence is depressing domestic demand across the globe, while world trade is falling at an alarming rate and commodity prices have tumbled" Strauss-Kahn added.

As advanced countries focus on problems in their own economies, Strauss-Kahn called on the international community not to forget Africa, where regional growth is expected to slow sharply to 3% this year, half the rate of the past five years.

Strauss-Kahn warned the projection for 3% "may be too optimistic".

"Even though the crisis has been slow in reaching Africa's shores, we all know it is coming and its impact will be severe," he said. "We must ensure that the voices of the poor are heard. We must ensure that Africa is not left out," he added.

He said the crisis threatens to unravel Africa's economic and social success over the last decade and that millions of people will be thrown back into poverty.

"This is not only about protecting economic growth and household incomes - it is also about containing the threat of civil unrest, perhaps even war. It is about people and their futures," he added.

He said the combined impact of economic and financials shocks on Africa's growth will be severe. Financial flows are becoming more scarce, trade financing even scarcer and more expensive and foreign investment in Africa's stock and bond markets has fallen, he added.

"As growth around the world has almost come to a halt, demand for Africa's products is plunging. Tourism revenue is likely to decline as consumers around the world are tightening their belts," Strauss-Kahn said.

Tanzanian President Jakaya Kikwete said the crisis poses the greatest danger to Africa in recent history and threatens to reverse, even wipe out, hard won social-economic gains.

"So far Africa's voices on this unnerving situation have been muted," Kikwete told the 300 delegates.