World economic crisis

“Great Recession” in 2009, says IMF head

Article published on the 2009-03-10 Latest update 2009-03-10 11:05 TU

Dominique Strauss-Kahn in Dar es Salaam on Monday.
(Photo: Reuters)

The world is entering a “Great Recession” and risks having negative economic growth in 2009, Dominique Strauss-Kahn, managing director of the International Monetary Fund, said Tuesday. As stocks hit 10 and 20-year lows, the IMF head warned that millions of Africans risk falling back into poverty.

As Japan faced a sixth straight quarter of negative growth, Germany’s exports slumped and China announced a price drop that raised the specter of deflation, Strauss-Kahn said that we are at “critical juncture in history.”

Speaking to a gathering of African finance ministers in Dar es Salaam, Tanzania, Strauss-Kahn declared that “the IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes.”

It was the first time the IMF chief had predicted economic contraction, after saying last week that no recovery was coming before 2010.

This was in stark contrast to the optimistic declarations of a gathering of top central bankers on Monday. "We have a number of elements that are suggesting that we are approaching the moment where you would have a pick up," European Central Bank head Jean-Claude Trichet said after a meeting of the central bankers of 10 industrial nations.

But as American stocks dropped to a 12-year low, influential investor Warren Buffet wasn't so optimistic, stating Monday that the economy has "fallen off a cliff" and could take five years to recover.

"I've never seen Americans more fearful," Buffett, one of the world's richest men, said in an interview on American television. "It takes five minutes to become fearful, much more time to regain confidence."

Meanwhile, Strauss-Kahn emphasised the impact that the downturn would have on the world’s poorest countries, saying “even though the crisis has been slow in reaching Africa’s shores, we all know that it’s coming and its impact will be severe.”

Heeding his warning, the European Union called on the IMF to double its funds available to developing nations to 500 billion dollars (396 billion euros), according to a draft document.

In what could be the first step in this process, IMF representatives met with ministers from the new unity government in Zimbabwe, and are reportedly ready to lift the suspension of assistance to the country.