[the Guardian] IMF warns of global recession Staff and agencies Wednesday September 26, 2001
The International Monetary Fund today warned of a serious global economic slowdown because of the fallout from the attacks on the US. But the world's leading economic institution insisted that world recession could still be avoided by aggressive government policy actions to stimulate growth. The IMF chief economist, Kenneth Rogoff, initially said a recession in the America was a "done deal." He subsequently tempered his remark by adding that it was still too early to tell whether the September11 attacks would push the already weak US economy into a full blown recession. Mr Rogoff said the real question was whether the US had entered a sustained recession or would bounce back quickly. He argued that there was every reason to believe the US economy would recover quickly next year because of the Federal Reserve's interest rate cuts and congressional approval of extra public spending. The global economy was already teetering on the brink of recession because of a longer-than-expected slowdown in the US and weakness around the world, the IMF said in its latest World Economic Outlook forecast. Even before the terrorist assault, the IMF had slashed its global growth forecast for 2001 to just 2.6%, the poorest showing since 1993 and down 0.6% from a May forecast of 3.2% growth. In the view of economists, global growth below 2.5% constitutes a growth recession because economic activity at that pace is too feeble to keep unemployment from rising substantially in parts of the world with high population growth. The IMF said that even its reduced figure of 2.6% may not be met because of the severity of the fallout from the terrorist attack, which had a "a negative effect on activity now in many regions of the globe." The IMF compared the attacks to the costliest natural disaster in modern history, the earthquake in Kobe, Japan in 1995, when over 6,400 people died and property damage reached $120bn, or about 2.5% of Japan's gross domestic product. But the total effect of the terrorist attacks on the US economy could be more far-reaching, particularly if shaken consumer confidence does not rebound, the Fund said. "Since the terrorist attack was a deliberate action with long-term security implications, the effects on consumer psychology may well not be comparable," the IMF said. "There is now no major region providing support to global activity. This has increased the vulnerability of the global economy to shocks and heightened the risk of a self-reinforcing downturn whose consequences could prove difficult to predict." For the US, the IMF projected 1.3% growth this year, 0.2% lower than its May forecast. For 2002, the IMF forecast US growth would rebound slightly to 2.2%, well short of 4.1% growth in 2000. The IMF's outlook for Japan was even gloomier. Japan is probably already in its fourth recession of the decade, the IMF said, as it projected that the world's second-largest economy would shrink by 0.5% this year and manage only a 0.2% gain in 2002. For Germany, Europe's largest economy, the IMF put growth this year at 0.8%, 1.1% below its May projection. It forecast Germany would grow by 1.8% next year. The forecast for UK growth, at 2% this year, is close to consensus forecasts. ------------------------------------------- Macdonald Stainsby Rad-Green List: Radical anti-capitalist environmental discussion. http://lists.econ.utah.edu/mailman/listinfo/rad-green ---- Leninist-International: Building bridges in the tradition of V.I. Lenin. http://lists.econ.utah.edu/mailman/listinfo/leninist-international ---- In the contradiction lies the hope. --Bertholt Brecht _______________________________________________ Leninist-International mailing list [EMAIL PROTECTED] To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/leninist-international
