World's financial lobby braces for global contraction next year
The world's largest grouping of financial institutions expects the global economy to contract in 2009 as the effects of a massive financial crisis spread from wealthy nations to developing countries, dpa reported.
The Institute of International Finance predicted a 0.4-per-cent decline in growth next year, an even more pessimistic forecast than other global financial institutions, according to an economic outlook released Thursday.
The current economic crisis was "shaping up to be the most severe globally synchronized recession in modern history," said the IIF's Managing Director Charles Dallara. There has been no case of a global contraction in the last 50 years, the IIF said.
Both the International Monetary Fund and World Bank have predicted a global recession next year - defined as below 3-per-cent-growth - but still expect positive growth over the year.
The more pessimistic outlook is largely the result of a sharp downturn in the developing world.
Latin American growth will fall from 4.5 per cent this year to 1 per cent in 2009. China will drop from 11.9 per cent in 2007 and 9.3 per cent this year to 6.5 per cent in 2009.
While the financial industry managed to avoid collapse after the bankruptcy of Lehman Brothers Holdings Inc in September, Dallara said "another round" of intervention in banks may be necessary in the coming months.