The multilateral development bank said its outlook is for 0.5 percent growth in 2009 based on minus-2 percent growth in developed nations partially offset by 3.3 percent growth in emerging economies. Global productivity is already at its lowest level since World War II.
The case of China underscores the severity of the global economic crisis. China’s red-hot economy has been growing at an annual pace of 10 percent or more, but dipped to 9.7 percent in 2008. IMF Director Dominque Strauss-Kahn said in a press briefing that the agency expects China to grow at a 6.7 percent clip.
China experts believe the country needs 10 percent growth just to keep its massive population employed and prevent dislocations that could lead to social unrest.
China’s government is reacting to the situation with a huge stimulus plan, heavily focused on infrastructure investment, and shifting policy from promoting export-led growth to focus more on growth generated by domestic demand. The change could have significant implications for international trade patterns.
The IMF’s 2009 outlook for Asia overall is 2.7 percent and 5.5 percent in developing areas of the continent.
Some countries are expected to begin a slow recovery at the end of 2009 and beginning of 2010, depending on the outcome of stabilization policies being pursued by governments around the world, Strauss-Kahn said. Asia, for example, is expected to almost double its growth to more than 5 percent in 2010.
He urged nations to pursue a dual policy of stimulus to circulate money into their economies along with restructuring of the banking sector to get rid of bad assets on their books or risk muting the impact of the spending push.
Infrastructure spending by governments is very beneficial because it addresses unmet societal needs and provides continued cash infusion as projects come online to help economic recovery during the next couple of years, said Anoop Singh, director of the IMF’s Asia and Pacific Department, according to a transcript.
“So infrastructure is both needed, and the timing of its implementation, if it comes a bit later is not a problem. In fact, it’s part of the equation,” he said. ' Eric Kulisch
