IMF releases gory details on "severe recession inflicted by a massive financial crisis"

A year ago, the IMF predicted 3.8% growth for the world economy in 2009. In January, it predicted 0.5% growth. It now projects a global economic contraction of 1.9%. Three months from now???

The IMF has also raised its estimate of losses on distressed loans and securitized assets to $4.1 trillion. And it warns that its estimate of -1.9% growth may be optimistic:

The current outlook is exceptionally uncertain, with risks weighed to the downside. The dominant concern is that policies will continue to be insufficient to arrest the negative feedback between deteriorating financial conditions and weakening economies.

Its main fears that might push the global economy even lower:

  • “Rising corporate and household defaults that cause further falls in asset prices and greater losses across financial balance sheets”
  • “New systemic events that further complicate the task of restoring credibility”
  • “Fiscal and monetary policies may fail to gain traction, since high rates of precautionary saving could lower fiscal multipliers, and steps to ease funding could fail to slow the pace of deleveraging”

If you’re brave, you can read all the gruesome details or just the highlowlights or pick your favorite chapters.

Posted by James on Wednesday, April 22, 2009