IMF Says World Economy Will Contract in 2009

By Nasreen Seria

March 10 (Bloomberg) -- Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said the global economy will contract this year and warned that growth will be the worst “in most of our lifetimes.”

The slump in global trade and commodity prices will hurt poor countries, increasing the threat of political conflict and even war, Strauss-Kahn said in a speech to African central bank governors and finance ministers in Dar es Salaam, Tanzania today.

“The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes,” Strauss- Kahn said. “Continuing deleveraging by world financial institutions, combined with the collapse in consumer and business confidence is depressing domestic demand across the world.” He called the crisis a ‘great recession.’

The IMF had forecast in January that the global economy would expand 0.5 percent this year. The World Bank said in a March 8 report that the international economy was likely to shrink for the first time since World War II, and trade will decline by the most in 80 years.

European governments from Dublin to Athens have committed more than 1.2 trillion euros ($1.5 trillion) to protect their banking systems and leaders pledged to spend a combined 200 billion euros to try and lift their economies out of the worsening slump. The U.S. is spending $787 billion on an economic stimulus package to revive its economy.

To contact the reporter on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net