- The Washington Times - Thursday, March 19, 2009

WASHINGTON (AP) - The world economy is expected to contract in 2009 for the first time in 60 years and governments should do more to counter the downturn, the International Monetary Fund said Thursday.

The global economy will shrink between 0.5 and 1 percent this year, the IMF said, while the U.S. economy will contract 2.6 percent. The figures represent a sharp downward revision from the IMF’s January estimates, when it expected the global economy would grow 0.5 percent this year, and the U.S. economy would shrink 1.6 percent.

The Fund made the projections in a paper it presented last week to a meeting of the Group of 20 finance ministers in London. The IMF released the paper Thursday.

In the paper, the IMF called on G-20 governments to take steps to relieve their financial systems of distressed assets and free up credit.

Without such action, “the (global) recession will be deeper and more prolonged,” even if countries take steps to stimulate their economies, the IMF said.

The G-20 includes advanced economies such as the United States, the United Kingdom and Japan, and major developing nations like China, India and Brazil. Leaders from those nations will meet during a summit in London on April 2.

The IMF called on the G-20 countries to spend the equivalent of 2 percent of their gross domestic product on stimulus efforts in 2009 and 2010. Treasury Secretary Timothy Geithner has endorsed that target, while many European governments have resisted the call.

The IMF said global GDP fell an “unprecedented” 5 percent in the final quarter of last year. The U.S. economy contracted 6.2 percent, while Japan’s shrank 13 percent, a post-World War II record.

The IMF provides loans and other assistance to troubled countries and has 185 member nations.

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