The global economy is set to decline by 1.3% in 2009, the International Monetary Fund (IMF) says. However, the major economies are predicted to shrink even more. (See chart below) The prospects for the advanced economies are not any brighter in 2010, with an overall forecast of zero growth.
The IMF says this represents "by far the deepest post-World War II recession" with an actual decline in output in countries making up 75% of the world economy. After 60 years as the engine of world growth, the sharp fall in trade is now hitting many of the leading exporting nations, particularly in Asia.
At the heart of the crisis is the continuing overhang of losses in the financial sector, which the IMF now estimates at $4 Trillion, four times higher than it projected just one year ago.
And it warns that the current outlook is "exceptionally uncertain, with risks still weighting on the downside."