World economy set for ‘bad’ 2009, says IMF

The world economy will go through a rough patch this year and governments and central banks must revisit the way they operate, the head of the International Monetary Fund (IMF) said, adding that global cooperation was beginning to take root.

Dominique Strauss-Kahn said recent data on the world economy pointed to downside risks to the IMF’s latest forecasts, issued last month, which forecast global growth of 0,5% in 2009, the weakest since World War II.

Strauss-Kahn told French daily Les Echos on Wednesday that forecast could be cut to close to zero.

”I’m expecting that 2009 really will be a bad year,” Strauss-Kahn told a news conference on Thursday.

Governments around the world should improve cooperation and resist the temptation to work on their own, and there were signs this was beginning to happen, he said on the sidelines of a forum on competition issues.

”We need cooperation to be heightened and reinforced. Honestly, I think that this is starting to happen, that head of states and governments … are conscious of this need for cooperative policies,” he said.

Strauss-Kahn reiterated that countries had in recent months tended to agree on the need to work together at international forums but returned home to work with national constraints in mind.

Countries should seek to restore credit flows since economic stimulus plans would otherwise struggle to work, he said.

He urged governments to review everything from supervision and governance issues to the way monetary policy is handled. — Reuters

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