Jul 8, 2009, 14:27 GMT
Washington - The world is beginning to pull out of its first recession since World War II, the International Monetary Fund said in a slightly rosier economic report released Wednesday.
In its first update since April, the IMF said the global economy was already stabilizing, the financial crisis has eased and the recession will end in the second half of this year.
The report marked the first time the IMF has sounded a more positive note since the financial crisis struck in October, though the global lender also warned against complacency.
'The worst is behind us and the recovery is coming,' said IMF chief economist Olivier Blanchard. 'The recovery is fragile however.'
The world economy will shrink 1.4 per cent this year but grow by 2.5 per cent in 2010, the IMF said. That compares to April's prediction of a 1.3-per-cent contraction in 2009 and growth of 1.9 per cent next year.
Blanchard said the improved forecast was mainly due to improvements in Asia, especially China and India. But the IMF warned the recovery would be 'uneven' and growth would remain 'sluggish' for much of the next 2 years.
Most of the growth over the next 2 years will come from the developing world. Wealthy countries where the crisis began will likely stay in recession until early to mid-2010.
Advanced economies will shrink 3.8 per cent this year and grow only 0.6 per cent in 2010, the IMF said. Developing countries by contrast will grow 1.5 per cent in 2009 and 4.7 per cent next year.
Blanchard said governments would have to continue spending money to boost demand, but should also begin tackling long-term budget deficits that are getting out of hand in many wealthy countries.
Without the right policies, there is a 'great risk that the recovery actually falters,' Blanchard warned.
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