Emerging economies to be next victims: IMF chief

[Neo]

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Emerging economies to be next victims: IMF chief

VIENNA (November 01 2008): Emerging economies will be the next to topple in the global financial crisis, the head of the International Monetary Fund Dominique Strauss-Kahn wrote in article published here on Friday. Emerging countries are facing additional problems, Strauss-Kahn wrote in a guest commentary for the daily Der Standard.

Their economies "aren't just facing falling exports and tumbling confidence," he said. "They're the latest victims of a financial crisis that started in the United States and spread to Europe and is now moving beyond Europe's borders."

Ironically, the measures taken in highly industrialised countries to resolve the crisis - such as banking bailouts - "make it more attractive for investors to recall their money back home. But it is precisely that which is making life so difficult for the emerging countries," Strauss-Kahn argued. In order to support their financial systems and overall economic demand, emerging countries also needed to take similar measures.

"But the newly acquired prosperity of many of these countries relies on access to global capital. And when this suddenly dries up, it deals a heavy blow to those countries and brings with it very major challenges, which they can't overcome on their own," the IMF chief wrote. Highly developed countries must be prepared to take over the responsibility of financing the measures "in proportions never seen before," he said. The alternative, Strauss-Kahn warned, would be widespread payment default, protectionism and banking controls.

[Neo]

IMF sees recession in advanced economies

WASHINGTON, Nov 6: The International Monetary Fund on Thursday forecast advanced economies would contract 0.3 per cent next year in the face of an escalating global financial crisis, the first such decline since World War II.

The IMF slashed its global growth forecast for 2009 to 2.2 per cent, still led by emerging economies although at a weaker pace.

Less than a month ago, in its twice-yearly World Economic Outlook report, the IMF forecast 0.5 per cent growth in the advanced economies and 3.0 per cent worldwide.

“Prospects for global growth have deteriorated over the past month, as financial sector deleveraging has continued and producer and consumer confidence have fallen,” the IMF said.

“In advanced economies, output is forecast to contract on a full-year basis in 2009, the first such fall in the post-war period,” the 185-nation financial institution said in an update of its October World Economic Outlook (WEO) report.

The IMF said the downturn in advanced economies would be “broadly comparable in magnitude” to recessions in 1975 and 1982, but that “a recovery is projected to begin late in 2009.”The IMF made more modest downward revisions to its 2008 forecasts, projecting world growth at 3.7 per cent, down 0.2 point, and advanced economies at 1.4 per cent, down 0.1 point.

But it sharply lowered its forecast for the United States in 2009, predicting the world’s largest economy would contract 0.7 per cent. In its WEO issued on October 8, the US economy was seen growing at a meagre 0.1 per cent.

The IMF said it now sees far more difficult conditions worldwide as a result of a global credit crunch that has hit banks and financial markets.

“Markets have entered a vicious cycle of asset deleveraging, price declines, and investor redemptions,” the IMF said.

“Beyond the direct impact of the financial crisis, activity is increasingly being held back by slumping confidence. As the financial crisis has become more entrenched, households and firms are increasingly anticipating a prolonged period of poor prospects for jobs and profits. As a result, they are cutting back on consumption, notably of durables, and investment.”The hardest-hit economy will be Britain, the IMF said, projecting a contraction of 1.3 per cent in 2009, down 1.2 points from the October forecast.

The IMF said the United States, the epicentre of a financial crisis that erupted in August 2007 after the collapse of the subprime mortgage market, would still show positive growth for 2008, but at a tepid rate of 1.4 per cent, with the second-half contraction offsetting growth in the first six months of the year.

Official US data, which may still be revised, showed US gross domestic product fell at a 0.3 per cent annual pace in the third quarter amid a sharp retrenchment by consumers and businesses.—AFP

[su-47]

well, its not unexpected. if the purchasers become less wealthy, they'll buy less, and the exporters will suffer.

Growth rate for BRIC countries as well as other emerging economies will definitely take a blow, but hopefully everything will be back on track after about 12 months.

[daredevil]

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These things are Cyclical. Things will be normal sooner or later. In fact, best things have actually came out these periods. People will become more creative when you challenge.