IMF sees recession in advanced economies

Leading developed economies will witness their first annual contraction next year since the World War II, ravaged by the crippling global financial crisis, the International Monetary Fund (IMF) said. The IMF now expects rich world economies to contract by 0.3% as against its earlier projection of a 0.5% growth. It expects 2009 global economic growth of 2.2%, down by 0.8% from the forecast it announced in October. Because trend output growth in the rich world has slowed over recent decades, the projected downturn is not unprecedented, the IMF said. In terms of undershooting potential, it is comparable to the recessions in 1975 and 1982, it added. "Market conditions are starting to respond to policy actions, but even with their rapid implementation, financial stress is likely to be deeper and more protracted than envisaged in October," the IMF said in a statement. While government efforts to cushion the blow were helping to some extent, more steps were needed, the IMF said. "There is a clear need for additional macroeconomic policy stimulus relative to what has been announced thus far," the IMF added. "Room to ease monetary policy should be exploited," it added.