IMF troubled by 2009, but likes next year

The IMF report on the global economy had a good news/bad news aspect to it. The agency expects "the world economy to shrink by 1.4 percent in 2009, slightly worse than its earlier estimate of a 1.3 percent contraction." It upped expectations for next year to 2.5 percent growth from the 1.9 percent number it offered in April.

The optimism for 2010 may be premature. Several G8 leaders, gathered at a summit in Italy, have expressed concern that large stimulus packages are not affecting national economies fast enough. In the U.S. there is already talk of a second stimulus program. That would be on top of the $787 billion already in place.

With unemployment moving quickly towards 10 percent in America and much of the stimulus money not expected to have an effect until next year, the world's largest economy may not rise out of recession.

The trouble in the U.S. could have a domino effect, especially next year. China's $585 billion stimulus package has been successful, so far. Chinese economists expect GDP growth in the second quarter was between 7 percent and 7.5 percent, up from 6.1 percent in the first quarter of 2009. But China still makes much of its living off exports, especially those to the U.K. and E.U. nations.

No matter what the IMF says, the global recovery is still on the critical list.

Douglas A. McIntyre is an editor at 24/7 Wall St.


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