Global Growth at Lowest Level in Decade: IMF

27 September 2001

The world’s economy may technically avoid a recession, but it will suffer the slowest growth since the early 1990s, according to the International Monetary Fund.

The lending agency’s newly released World Economic Outlook report predicts global growth for 2001 of 2.6%, marginally more than the 2.5% considered by the IMF as the upper limit of recession. A fairly strong recovery is predicted for next year, with global growth of 3.5%.

However, the figures do not take into account the impact of this month’s devastation in Washington and New York. “There is no doubt that the attack is having a negative effect on activity now in many regions of the globe,” admitted IMF chief economist Kenneth Rogoff, “and that it has increased what were already significant downside risks to the short-term global outlook.”

Global performance has partly been affected by a slowdown in Europe. In the eurozone, IMF growth forecasts have been cut from 2.2% to 1.8% for 2001 and from 2.8% to 2.4% for 2002. The slowest nation in the region will be Germany, with growth predicted at 0.8% this year and 1.8% next.

In addition, Japan’s recession has deepened, while the USA is taking longer to recover than previously expected. Rogoff initially declared that a recession in America is “a done deal”. However, he later withdrew the statement, stating: “We know that growth is going to be lower for the United States, but we simply have no idea of exactly how much lower.”

Nevertheless, Rogoff’s initial pessimism matches the views of many private economists, who foresee a US and global recession this year and weaker growth than previously expected in 2002.

News sources: New York Times; Wall Street Journal