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A FAILURE by the G20 summit on April 2 to tackle the global recession will lead to an even more prolonged downturn, the International Monetary Fund (IMF) warned last week, as it slashed its forecasts for growth.
IMF's latest bulletin warned: "Delays in implementing comprehensive polices to stabilise financial conditions would result in a further intensification of negative feedback...leading to an even longer and deeper recession". Stimulus packages would also need to be maintained in 2010, IMF said. The fund also issued a stark warning that the collapse of some national economies in central and eastern Europe could still trigger another wave of banking failures.
IMF's note, prepared for the G20, warns of a sort of domino effect running through the continent via the banking system as problems in nations such as Hungary, Romania, Bulgaria and the Baltic states knock down otherwise relatively healthy advanced economies – including those in Sweden, Austria, Switzerland, Belgium and the Netherlands. That, in turn, could trigger a further international panic like the one seen on global stock markets last October.
The UK is among those especially exposed to further weakness in property markets, IMF warned. "Falling home prices and rising defaults in the United States, United Kingdom and parts of the euro area are already exacerbating strains in the financial system," it said. "Mounting lay-offs would further dampen consumption and residential investment."
Differences on the timing of future stimulus packages have emerged as one of the important obstacles to a stronger international response to the crisis. Despite urging by the US and Britain, the German government and others in the Eurpean Union have resisted pressure to introduce fresh packages quickly. The IMF suggests all nations implement a fiscal boost of around 2% of GDP, which would create more than 19 million jobs globally.
BusinessWeek
IMF's latest bulletin warned: "Delays in implementing comprehensive polices to stabilise financial conditions would result in a further intensification of negative feedback...leading to an even longer and deeper recession". Stimulus packages would also need to be maintained in 2010, IMF said. The fund also issued a stark warning that the collapse of some national economies in central and eastern Europe could still trigger another wave of banking failures.
IMF's note, prepared for the G20, warns of a sort of domino effect running through the continent via the banking system as problems in nations such as Hungary, Romania, Bulgaria and the Baltic states knock down otherwise relatively healthy advanced economies – including those in Sweden, Austria, Switzerland, Belgium and the Netherlands. That, in turn, could trigger a further international panic like the one seen on global stock markets last October.
The UK is among those especially exposed to further weakness in property markets, IMF warned. "Falling home prices and rising defaults in the United States, United Kingdom and parts of the euro area are already exacerbating strains in the financial system," it said. "Mounting lay-offs would further dampen consumption and residential investment."
Differences on the timing of future stimulus packages have emerged as one of the important obstacles to a stronger international response to the crisis. Despite urging by the US and Britain, the German government and others in the Eurpean Union have resisted pressure to introduce fresh packages quickly. The IMF suggests all nations implement a fiscal boost of around 2% of GDP, which would create more than 19 million jobs globally.
BusinessWeek
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