WASHINGTON — The global economy is expected to lurch into reverse this year for the first time since the Second World War with appalling consequences for countries large and small — trillions of dollars in lost business, millions of people thrust into hunger and homelessness and crime on the rise.
And the pain won’t stop this year, the International Monetary Fund declared Wednesday, for what it said was “by far the deepest global recession since the Great Depression.”
To cushion the blow and head off further damage next year, the IMF is calling for more stimulus projects from the word’s governments, including major spending for public works projects.
Even with many countries taking bold steps to turn things around, the global economy will shrink 1.3 per cent this year, the IMF predicted in its dour forecast.
“We can be fairly confident that in 2010 or even 2011, economies will not be back to normal,” said IMF chief economist Olivier Blanchard.
“Which means that governments should today basically think at least about contingent plans for infrastructure spending. … Next year will be too late.”
In the U.S., President Barack Obama’s US$787-billion stimulus includes money for fixing roads and bridges and other infrastructure projects.
Without the help of countries’ stimulative fiscal policies — such as tax reductions or increased government spending — the blow to the global economy would be even worse, Blanchard said: “We would be in the middle of something very close to a depression.”