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IMF increases forecasts

Business Materials 9 July 2009 15:59 (UTC +04:00)

Azerbaijan, Baku, July 9 / Trend , N.Ismayilova/

The global economy is beginning to pull out of a recession unprecedented in the post-World War II era, but stabilization is uneven and the recovery is expected to be sluggish, the World Economic Outlook (WEO) by the International Monetary Fund (IMF) said.

Economic growth during 2009-2010 is now projected to be about 0.5 percentage points higher than projected in the April 2009 review, reaching 2.5 percent in 2010.

Financial conditions have improved more than expected, owing mainly to public intervention, and recent data suggest that the rate of decline in economic activity is moderating, although to varying degrees among regions. Despite these positive signs, the global recession is not over, and the recovery is still expected to be slow, as financial systems remain impaired, support from public policies will gradually diminish, and households in countries that suffered asset price busts will rebuild savings. The main policy priority remains restoring financial sector health. Macroeconomic policies need to stay supportive, while preparing the ground for an orderly unwinding of extraordinary levels of public intervention.

Accordingly, global activity is forecast to contract by 1.4 percent in 2009 and to expand by 2.5 percent in 2010, which is 0.6 percentage point higher than envisaged in the April 2009 WEO (Table 1). The higher annual average growth rate for 2010 largely reflects carryover from a markup in growth during the final half of 2009. On a fourth-quarter-over-fourth-quarter basis, real GDP growth is projected at 2.9 percent in 2010, compared with 2.6 percent in the April WEO forecast.

Forecasts of economic growth for Central and Eastern Europe and the Commonwealth of Independent States (CIS) were reduced by 1.3 and 0.7 percentage points in 2009 and increased, respectively, 0.2 and 0.8 percentage points in 2010. Changes differ in different countries, but many of them have been heavily affected by the global financial crisis, accompanied with changing direction of capital flows and a sharp decline in exports of exchange goods, although recent rise in prices of stock products is projected to increase demand in the major economies of the CIS.

The advanced economies as a group are still projected not to show a sustained pickup in activity until the second half of 2010, consistent with the April 2009 WEO forecast. The countries with low incomes face their own challenges, as official aid has declined and their economies are particularly vulnerable to sharp price fluctuations in stock products.

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