A 1.3% fall in global GDP may not sound that bad to some readers, but in fact it is a horrid outcome. Most of us deal with advanced economy growth statistics, which are lower than those of emerging economies. And a negative world result of this level again confirms the sychronized nature of this contraction.
From the Financial Times:
The global economy will contract sharply this year and recover only sluggishly in 2010, the International Monetary Fund said on Wednesday as it called on governments to sustain or even increase fiscal stimulus next year.
The IMF said that world output would contract by 1.3 per cent this year and grow by just 1.9 per cent the year after in what it described as a “substantial downward revision” of its January forecasts, when it said that the global economy would grow by 0.5 per cent this year and spring back to 3 per cent growth in 2010…
The new forecasts came as Japan reported its first quarterly trade deficit in nearly three decades for the year to March, highlighting the global downturn’s effect on the world’s second-largest economy, which remains heavily reliant on exports….
The fund blamed the worsening prospects on the intensifying “vicious circle” between the ailing financial sector and the shrinking real economy.
Overall credit to the private sector in advanced economies will decline in 2009 and 2010 as banks continue to reel in lending, it said. Any global recovery would depend on more decisive efforts to shore up financial institutions, it added.