The International Monetary Fund is predicting a "severe recession" of global proportions in 2009 and a "gradual" recovery in 2010. According to the World Economic Outlook, GDP will shrink by 1.3% in 2009 before growing again by 1.9% in 2010. These are brighter figures than those posted in January, when IMF analysts predicted a 1.8% drop in 2009 for the global economy and a 1.1% drop in 2010.
The world economy is likely to shrink this year for the first time in six decades.That could leave at least 10 million more people around the world jobless . "By any measure, this downturn represents by far the deepest global recession since the Great Depression," the IMF said in its latest World Economic Outlook. "All corners of the globe are being affected."
As negative factors in the outlook are mentioned : It’s expected to take longer than previously thought to stabilize world financial markets and get credit flowing freely again to consumers and businesses. Doing so will be necessary to lift the U.S., and the global economy, out of recession.
The report comes in advance of Friday’s meetings between the United States and other major economic powers, and weekend sessions of the IMF and World Bank. The talks will seek to flesh out the commitments made at a G-20 leaders summit in London last month, when President Barack Obama and the others pledged to boost financial support for the IMF and other international lending institutions by $1.1 trillion.
The IMF stated that international actions carried out to present achieved "limited" progress and that confidence in financial markets is "still low". Consequently it is calling for "decisive actions to restore financial stability" and "monetary and budget policies" capable of offering "strong and continued support to aggregate demand", such as "capital injections, introduction of measures to promote liquidity, softer monetary policies and budget stimulus packages".
The IMF also predicts that the US economy will shrink by 2.8% in 2009 and that it will flat-line in 2010, and says that the US will see two years of negative inflation, estimating that consumer prices will drop from +3.8% in 2008 to -0.9% in 2009 and -0.1% in 2010. The Euro-zone will instead suffer a 4.2% drop in GDP this year and a 0.4% drop in 2010, while inflation will drop from +3.3% in 2008 to +0.4% in 2009 and +0.6% in 2010. Japan’s GDP will shrink by 6.2% in 2009 before increasing by 0.5% in 2010, while consumer prices will pass from +1.4% in 2008 to -1% in 2009 and -0.5% in 2010.
Generally speaking developed economies will suffer a 3.8% contraction in GDP in 2009 and GDP will stay flat in 2010, whereas GDP in emerging economies will increase by only 1.9% in 2009 (compared to +6.1% for 2008) before rising by 4% in 2010.
NOTE: To access to the full [IMF document- World Economic Outlook- Crisis and Recovery- >http://www.imf.org/external/pubs/ft/weo/2009/01/index.htm]
“Let us be united in our efforts to negotiate a powerful outcome document,” General Assembly President Miguel d’Escoto Brockmann said this morning as he appealed for Member States’ support and involvement in the few short weeks before the 1-3 June Conference on the World Financial and Economic Crisis and its Impact on Development.
The upcoming event was an opportunity of which the world could not afford not to take advantage, he said, adding that the Summit of world leaders would be both timely and historic. It had been organized in record time, reflecting the need for a timely response to the financial and economic crisis that continued to unfold around the world. The decision to hold a conference at the highest level had committed the international community to initiating a “global conversation” on the crisis, mitigating its impact on developing countries and addressing reform of the international economic and financial architecture.
Having met under the chairmanship of Nobel Laureate Joseph Stiglitz, 20 experienced economists and central bankers from all regions — members of the Commission of Experts on Reforms of the International Monetary and Financial System established by the President of the General Assembly — had presented their recommendations in a three-day interactive thematic dialogue at the end of March. Other inputs included testimony and numerous reports from Member States, the President of the Economic and Social Council, United Nations agencies and programmes, as well as civil society organizations and the private sector.
Presenting the first draft of the Conference outcome document, the President said it must speak to the hundreds of millions who had no other forum to express their unique and often divergent perspectives. It must reflect the call of many nations for new paradigms for building a sustainable economic life which would integrate the values and ethical imperatives that should guide development. The document must reflect the call for greater justice and inclusiveness in global economic life, as well as the passionate call for the promotion of the common good over the obsessive impulse to consume more and more and to dominate over others at any cost.
The Conference must be seen not as an event in itself, but as an inflection point in a long-standing and continuous movement to strengthen the role of the United Nations in global governance, he said. Thus far into the planning for June, agreement had been reached on eliminating the restrictions imposed under previous initiatives to limit the scope of the deliberations. While significant in itself, that achievement would mean almost nothing without an effective mechanism to carry that agenda forward. The business of the Conference would not end on 3 June; it was vitally important to define a follow-up mechanism that would allow Member States to participate in the ongoing work.
The United Nations was and must be the place where the developing countries could speak in their own voice, he continued. But all too often, the United Nations itself spoke with the voice of the “least common denominator” consensus, which unfortunately said little to the urgent needs of developing nations. “If we can begin only with what is already agreed, it is difficult to see how this Conference or any process that accepts such restrictions can ever be appealing to people who clamour for change, or be conducive to real progress.”
He said that, having travelled extensively in recent weeks to meet with Heads of State and Government and other high-level officials, he had tried his best to reflect their concerns and expectations in the draft outcome document, which would be the basis on which a decision would be made as to “whether to take the June Conference seriously, or to regard it as yet another international charade”. It now contained language that sought to send a clear signal that the Conference was truly dedicated to understanding and responding to the perspective of the many “excluded nations”.
The only way to do that was to begin with language that truly reflected their concerns and aspirations, he continued. In the exercise of his judgement and role, the President had also taken on most of the structure proposed by the facilitators, Frank Majoor of the Netherlands and Camillo Gonsalves of Saint Vincent and the Grenadines. Nearly all their substantive points had also been taken on board. “If I have erred in my judgement in what is required to make this conference successful, then I accept this responsibility. But time and goodwill will determine the ultimate success of our common efforts.”
Following the President’s presentation, Mr. Majoor protested “considerable” changes to the document in both length and substance, saying neither of the co-facilitators had been consulted on the text circulated. Today’s events were forcing him to “reconsider” his role as a facilitator. Having worked “in a cooperative manner with Member States [...] towards an inclusive, transparent and Member States-led process”, the facilitators had begun to develop a draft outcome document based on numerous verbal and written inputs from groups of Member States and individual countries.
He said those inputs included the summary of a related meeting held by the Economic and Social Council and a ministerial meeting held by the Non-Aligned Movement in Havana, Cuba, among others. Throughout the drafting process, the co-facilitators had striven to keep the General Assembly President and membership informed. “We came up with a very coherent and concise document [...] reflective of all the views expressed and which could serve as a good basis for constructive negotiations in the limited time available.”
The representative of the Czech Republic, speaking on behalf of the European Union, said the bloc had expressed repeatedly its strong interest to do anything possible to ensure the success of the Conference, which was preconditioned on mutual understanding and a spirit of cooperation. The President’s letter of invitation said that all authorized documents would be circulated among the membership and expressed concern over the possible existence of other documents.
He said that the President’s letter of 23 March had informed everyone that the initial draft would be developed in agreement with the facilitators so as to reflect a membership-led process. The resolution from the Follow-up International Conference on Financing for Development toReview the Implementation of the Monterrey Consensus requested that any drafts be introduced in a transparent manner. Twenty-four days before the event, the European Union reiterated its readiness to work with the President and others to ensure success, but the present situation raised the European Union’s “greatest concerns” and its Presidency would also refer to his capital for an appropriate response.
That position was supported by several other speakers, including the representatives of France, Italy and Spain, who emphasized the importance of a fully intergovernmental and transparent procedure, which had begun with the work of the facilitators. Spain’s representative stressed that it was “extremely important” for the Conference to succeed, and to be a success it must ensure respect for the principle of transparency.
Canada’s representative said the Assembly now had before it a draft outcome expressing the President’s own views. While interested in those views, Canada was concerned about lack of transparency in preparing the document and cautioned against losing the Member States-driven process. The views of all Member States must be considered in preparing for the Conference. The representative of the United States also registered concern about the changed process, which had been expected to be transparent.
Several delegates echoed Germany’s view that it would be useful to circulate the paper prepared by the facilitators “to avoid confusion and have a clear sense of where we stand”.
The President responded by saying there was just one document, but efforts had been made to reflect fully all the important inputs from co-facilitators. Everything possible had been done to ensure that all views were incorporated, including the immense majority whose views were never taken into account.
Representatives of another group of countries — Cuba, Ecuador, Venezuela, Syria and Iran — expressed hope that the document presented would provide the basis for negotiations. Venezuela’s delegate cited co-facilitator Gonsalves, who had said recently that the draft prepared by the facilitators included diverse opinions, but did not take into account the views of the Group of 77 and China. Venezuela was sure the document presented today included various inputs. All countries must participate, particularly the developing countries, which lacked a sufficient voice in the process.
Cuba’s representative expressed concern that 8 to 10 days would be needed to analyse the document, noting that some delegations had expressed their intention to reconsider their participation in the Conference. That was totally inappropriate at the present time. The Assembly had no option but to start work on the document presented by the President, who had discharged his obligation to offer a text. It was now it was up to Member States to discharge their responsibility to start the negotiations.
Also supporting a start to negotiations on the basis of the President’s document, Nicaragua’s representative added that the subject of the Conference was of immense importance for most countries of the South, who al
Asian nations agreed on Sunday to create a $120-billion regional liquidity fund aimed to confront with own resources the global economic crisis.
Japan and China each committed $38.4 billion, or 32 percent, to the fund, while South Korea would provide $19.2 billion, the ministers said in a statement. The reminder would come from the 10 ASEAN member countries.
Japan also announced a plan to supply up to 6 trillion yen ($61.54 billion) to support its neighbours in an economic downturn.
The initiatives were announced on the Indonesian island of Bali, on the sidelines of the Asian Development Bank’s (ADB) annual meeting, and one analyst said they could lead to some optimism in regional markets on Monday.
"It’s definitely a step in the right direction for Asia to wean itself from dependence on the West. However, implementation is unlikely to have a sustainable impact on Asian economies in the absence of a robust U.S. consumer." While Asian banks largely avoided the credit crisis that tore through Wall Street and much of Europe, the region has since been hit by the downturn in the West, which has eroded demand for Asian automobiles, electronics and other exports.
The region’s economies are likely to grow just 3.4 percent in 2009, the slowest pace since the Asian financial crisis a decade ago, the ADB has forecast. It sees growth recovering to 6.3 percent next year if demand rebounds. China and Japan have each committed to provide 32 percent of the regional fund, known as the Chiang Mai Initiative. South Korea has committed to 16 percent, with the rest coming from the 10-member Association of South East Asian Nations (ASEAN).
The fund will offer emergency balance of payments support to any country hit with the type of capital flight that marked the Asian financial crisis of 1997/98.
"The current global situation requires more concerted efforts to enhance confidence, maintain financial stability, and prevent further decline in economic growth," a joint statement by the region’s finance ministers said.
"The deepening global economic downturn, coupled with heightened risk aversion in financial markets, (has) adversely impacted trade and investment in the region."
FROM 1997-98 ASIAN CRISIS TO NOW
The idea of the pool stemmed from the devastation Asian nations suffered from the 1997-98 financial crisis, where the region sank into a deep recession after currencies collapsed in Thailand, Indonesia and South Korea. The losses could have been greatly reduced had there been an anti-crisis emergency facility.
But turning the idea into a tangible mechanism — and having all the details being agreed upon — costs Asia almost a decade. State leaders and finance ministers engaged in several rounds of talks on various agenda from individual country’s contribution, borrowing accessibility, to the surveillance and decision-making mechanism
By committing the same amount as Japan, China was also looking to assert itself in the region, one meeting participant said.
"The details of the agreement reflect China’s ascent in the economic community," said the participant, who declined to be identified because of the sensitivity of the topic.
The fund will be launched by the end of the year, and a surveillance unit to monitor the region’s economies will be set up with the help of the ADB and the ASEAN Secretariat.
ASEAN includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Underlining the growing importance of the Asian regional bond market, Standard & Poor’s announced on Sunday it was launching an ASEAN credit rating scale to increase transparency about the credit risk of regional borrowers.
ADB President Haruhiko Kuroda told the bank’s annual meeting that Asia needs to develop its debt markets to better channel the region’s massive savings into investments and stave off another crisis
No discussions have yet been held on what currency the regional fund will be based on, but Japan’s separate plan, announced by Finance Minister Kaoru Yosano, is aimed at promoting the use of the yen in the ASEAN region, Tokyo said.
Yosano said Japan will also introduce a framework to guarantee samurai bonds, yen-denominated debt issued in Japan by foreign entities, up to 500 billion yen ($5.13 billion).
The ADB itself also plans to ramp up lending to about $33 billion in 2009-2010, almost a 50 percent increase over 2007-2008, to counter the crisis. The Manila-based multilateral lender is funded by donations mainly from Japan, the United States and European nations.