World economy to grind to a halt
By politics.co.uk staff
The world economy will grow at its slowest rate since the second world war in 2009, the International Monetary Fund (IMF) has claimed.
In a severe revision of its previous forecast, the IMF warned the global economy was about to take a “sharp turn for the worse”.
“We now expect the global economy to come to a virtual halt,” IMF chief economist Olivier Blanchard said as he unveiled a growth prediction of 0.5 per cent this year.
The IMF had previously predicted growth of 2.2 per cent.
The economic situation for Britain is even bleaker, with the IMF forecasting a contraction of 2.8 per cent this year, the worst of all developed nations.
In his Pre-Budget Report, chancellor Alistair Darling said the economy would shrink by a maximum of 1.25 per cent in 2009.
Mr Blanchard is demanding new policy initiatives from world governments, including setting up a “bad bank” for toxic assets.
“Despite wide ranging policy actions, financial strains remain acute, pulling down the real economy,” the IMF said.
“A sustained economic recovery will not be possible until the financial sector’s functionality is restored and credit markets are unclogged.”
In the House of Commons today David Cameron again tried to force an admission from Gordon Brown that he had presided over a return to boom and bust.
“How far will the economy have to contract before he admits the economy has hit bust?” the Conservative party leader asked.
But the prime minister accused Mr Cameron of “going around the country saying the opposite of what is true”.
“The measures we are taking to deal with this global recession are measures that other countries are now taking, following us,” he said.
“The one thing other countries are not doing is following the Conservative policy of doing nothing, which is not only the wrong thing but a disastrous course for this country.”
Both Mr Brown and Mr Darling will head to Davos on Friday to attend the World Economic Forum, although its impact has been questioned after Barack Obama’s administration opted not to send any senior representatives.
