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growth for Bangladesh in 2010 , accompanied by marginal inflationary
pressures next year. IMF's economic growth projection for 2010 is
the same as for this year. It predicted that inflation pressures would
reach 5.6 percent in 2010 , rising from 5.3 percent projected for
2009. The forecasts were published in 'the World Economic Outlook'
released yesterday, five days prior to the IMF-World Bank annual
meetings in Istanbul, Turkey. In previous publications, IMF forecasted
Bangladesh GDP growth at 6 percent and 6.3 percent for 2008 and
2007 respectively. After deep global recession, the Washington- based
institution said, economic growth has turned positive, as
wide-ranging public intervention supported demand and lowered
uncertainty and systemic risks in financial markets. Following a
sharp decline in the first quarter of 2009 , output in the second
quarter has begun to expand in some advanced and many emerging
economies -- led by Asia -- but in much of the world, activity
remains depressed, says the IMF report. "Recovery is expected to be
slow, as financial systems remain impaired. Support from public
policies will gradually have to be withdrawn and households in
economies that suffered asset price busts will continue to rebuild
savings while struggling with high unemployment," says the report.
The key policy requirements remain to restore financial sector health
while maintaining supportive macroeconomic policies until recovery
is on a firm footing. However, policymakers need to begin preparing
for an orderly unwinding of extraordinary levels of public
intervention, says the report. The global economy may shrink 1.1
percent in 2009 and is expected to increase 3.1 percent in 2010.
The estimates were higher than forecasts put out in July of 2.5
percent expansion next year and a 1.4 percent contraction in 2009.
IMF projected a negative 3.4 percent GDP growth for the advanced
economies, which is expected to recover with 1.3 percent growth in
the next year. However, the IMF warned that the data shows the
rebound will be sluggish and "for quite some time" it would be slow
to generate jobs. Meanwhile, credit would remain tight. The US, the
world's largest economy, may not recover from the downtrend this
year. IMF projected a 2.7 percent decline in GDP growth for the US
economy this year and a 1.5 percent increase in 2010. Growth is
expected to turn positive in the second half of 2009 , reflecting the
continuing fiscal boost and turns in both the inventory and the
housing cycles. However, although financial conditions have improved
significantly in recent months, markets remain stressed and this will
weigh on investment and consumption, the IMF report says of the US
economy. Unemployment in the US is expected to peak at above 10
percent in the second half of 2010 , while rising economic slack
should keep core inflation below 1 percent through most of next
year. In Europe, the pace of decline was moderating, with the 16-
nation eurozone seen returning to growth of 0.3 percent in 2010 ,
instead of the 0.3 percent fall projected in the IMF's previous
forecast in July. The IMF forecast indicated that emerging Asian
countries as a whole are on the road to recovery from the global
economic downtrend. However, Korea, Taiwan, Hong Kong, and Singapore
are expected to face economic growth declines in 2009 , with
possibilities of recovery next year. Developing Asian countries such
as China and India are expected to continue strong economic growth.
The projection said China would grow 9 percent and India 6.4
percent in 2010 , which was 8.5 percent for China and 5.4 percent
for India in the current year. Although Asia's export-oriented
economies were battered by the abrupt global downturn, the economic
outlook for the region improved markedly in the first half of 2009 ,
IMF said. "Recent developments point to strengthening of domestic
demand and exports, but questions remain about whether rebound can
become self-sustaining -- ahead of stronger growth pickup in the rest
of the world," the IMF report says. The recent, swift turnaround of
economic fortunes is remarkable. At the onset of the crisis, Asian
exporters were hit hard by the collapse of external demand. The
deterioration of activity was especially rapid for the more
export-oriented economies. In Asia, manufacturing-oriented economies
like Korea, Singapore and Taiwan slumped and by the end of 2008 ,
recorded peak declines in industrial production of about 25 percent.
Only China, Indonesia and India escaped severe recession, the result
of a large policy stimulus and, in the case of India, less
dependence on exports. A fundamental challenge in the aftermath of the
economic crisis will be to sustain solid global growth given the
damage caused by the crisis to productive potential and balance
sheets, says the IMF report. The financial system's capacity for
efficient intermediation and innovation will need to be restored to
support growth, while safeguarding financial stability. From the
demand side, the global economy faces a difficult rebalancing act --
shifting the sources of growth from public to private demand and from
internal to external demand, in external deficit countries affected by
pronounced credit and housing cycles, matched by counterpart
adjustments in surplus countries that have been heavily reliant on
export-led growth. Even with improving financial market conditions,
many households and firms in both advanced and emerging economies
will continue to face difficult conditions. In particular, bank loans
to the private sector are still stagnating or contracting in the US,
the Euro area and the UK, consistent with surveys among bank loan
officers that point to a continuation of very tight credit
conditions.
