Joshua Roberts/Bloomberg News
Olivier Blanchard of the International Monetary Fund.
Olivier Blanchard of the International Monetary Fund.
By BRIAN KNOWLTON
Published: April 22, 2009
Published: April 22, 2009
WASHINGTON — The global economy will most likely contract this year for the first time since World War II, and the recovery will take longer than expected, the International Monetary Fund said Wednesday.
The I.M.F. projected a 1.3 percent decline in global economic activity for 2009, down sharply even from the modest 0.5 percent growth it had projected in January. In the United States, still the “epicenter” of the crisis, according to the fund, economic contraction would be even greater, at 2.8 percent this year, with zero growth for 2010.
Separately, the Treasury secretary, Timothy F. Geithner, cautioned against expecting a quick recovery, underscoring the complications of the world’s increasingly interwoven economies and financial systems.
“Never before in modern times has so much of the world been simultaneously hit by a confluence of economic and financial turmoil such as we are now living through,” he said in a speech before the Economic Club of Washington.
The international fund said that it expected global growth to resume in 2010, but only at a 1.9 percent rate, notably sluggish compared with past recoveries. In normal times, growth would be closer to 4 percent.
“The recovery may actually be slower than usual, leading to a slow decrease in unemployment,” said Olivier Blanchard, director of the I.M.F.’s research department, at a news conference at the fund’s headquarters in Washington. “Our forecasts imply that unemployment will crest only at the end of 2010.”
Mr. Blanchard, in unveiling the World Economic Outlook, said that the United States unemployment rate was likely to peak around 10 percent. It is currently 8.5 percent, after months of relentless job losses. The International Labor Organization has estimated that world unemployment could rise to 7 percent this year, up from about 6 percent in 2008.
“The current outlook is exceptionally uncertain,” said the executive summary of the I.M.F. report, “with risks still weighing to the downside.”
The report was issued as finance ministers and central bankers from around the world were beginning to gather in Washington for the spring meetings of the I.M.F. and the World Bank. On the sidelines of those meetings, officials of the Group of 7 industrialized nations and the Group of 20, an expanded group that also includes the major emerging economies, will meet for continued discussions on the economic crisis.
Even among the details of a largely cautionary report, I.M.F. officials saw some signs of hope, largely because of the forceful fiscal steps and other measures taken by the United States, some European governments, and also by China.
Mr. Blanchard said that the fiscal responses of several major countries had made “a gigantic difference.”
“If there had been no fiscal stimulus across the world, world growth in 2009 would be 1.5 to 2 percent less,” he said. “We would be in the middle of something very close to a depression.”
While saying that “there is light at the end of this long tunnel,” he cautioned against seeing, in mixed economic data, reason for complacency. “The need for strong policies on both the macro and especially the financial fronts is as acute as ever,” he said.
Mr. Geithner said that only 17 of the 182 economies followed by the I.M.F. are expected to grow at faster rates this year than last, and 30 of the 34 advanced economies are expected to shrink, amid a collapse in world trade that “will likely be the worst since the end of World War II.”
Even as globalization speeds the flow of economic benefits in good times, he said, “now we are learning that in times of contraction, globalization transmits trouble with enormous speed and force, affecting economies around the world — the relatively strong as well as the more vulnerable.”
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