GLOBAL ECONOMY TO CONTRACT 1.3 PERCENT IN 2009, SAYS IMF

From Arul Rajoo

HANOI, May 25 (Bernama) -- The global economic growth is expected to fall
1.3 percent this year, the first negative global growth in the post-war period
while global trade is likely to contract 11 percent, the International Monetary
Fund (IMF) said Monday.

Akira Ariyoshi, Director of IMF's Regional Office for Asia and the Pacific,
said the contractions were far more than during any of the previous episodes of
global economic downturns.

"The global economy is facing its deepest and most widespread recession
since World War Two," he said.

Addressing Foreign Ministers attending the Asia Europe Meeting (ASEM) here,
he said while United States was the epicentre of the crisis, Europe and Asia
have been hit very hard by the crisis.

"For Europe, this was partly due to its own vulnerabilities, including
banks' exposures to toxic assets from the US, rapid credit growth as well as
large current account deficits in emerging Europe," he said.

On the contrary, Asia's exposure to toxic assets was limited and its
financial and macro-economic position entering into the crisis was strong, but
the region has been severely affected by the massive fall in exports.

Akira said various monetary and fiscal stimulus packages undertaken by
affected countries were beginning to bear fruit, but the recovery was expected
to be weak and protracted.

Following a weak first quarter this year, the rate of global economic
contraction should moderate but global output was expected to increase only
very gradually over 2010 and still remain well below potential, he said.

Asia, he said, was unlikely to experience a sharp recovery, and stronger
growth in China may not be enough to provide much of the a boost to the region,
given its focus on public investment.

Akira also said that continued spillover affects from the financial problems
in the US and Europe remain a particular concern.

Furthermore, he said fighting protectionism was also critical.

On IMF's role in dealing with the crisis, Akira said the new Flexible Credit
Line which provides large, upfront assistance for countries with sound economic
frameworks, with no policy condition, was a useful addition to the fund's
toolkit.

He said the provision of US$100 billion loan by Japan and European Union's
commitment to provide 75 billion euros, and the agreement at the G20 to expand
the IMF's borrowing agreement to treble IMF resources were a welcome move.
-- BERNAMA