The global economic conditions continued to worsen during the first half of 2009, as recessions deepened and became more widespread. Although there are signs of moderation emerging, the International Monetary Fund (IMF)-in its April report projected global economy to contract by 1.3% in 2009 in light of the significant financial strains and loss of investor and consumer confidence. This is the deepest global recession since the Great Depression. In March, the World Bank predicted global output to shrink by a larger 1.7% this year. The advanced economies are forecast to chart an average contraction of 3.8% in 2009, with Japan to fall by a steep 6.2% The US economy is projected to contract by 2.8% this year, while the economy of Euro zone could decline by 4.2%.
The emerging and developing economies as a group could see growth decelerating sharply to 1.6% in 2009 from 6.1% in 2008. The slowdown principally results from slowing global trade and investment as the advanced economic difficulties.
The world economy may recover in 2010. The IMF projected global output to record a moderate increase of 1.9% next year, mainly following expansion in the emerging economies, while the advanced economies would stabilize. However, the downside risks to growth remain significant unless the functionality of financial systems, especially in the US and Europe, are restored and problems in credit markets resolved.
According to IMF, banks worldwide will require additional capital of between USD775 billion to USD1.5 trillion in 2009-2010 following larger write-downs of loans and securities amounting to an estimated USD2.8 trillion triggered by the financial and economic crises. The US banks would require additional capital up to USD500 billion in the two years following further write-downs of up to USD550 billion. Subsequently, the prospects of emerging economies recovering to help pull up global growth could also be limited following strains...