IMF urges more stimulus measures to counter global economic slump

WASHINGTON, March 8, 2009 (AFP) – The International Monetary Fund called Friday for governments to take further stimulus measures to counter a severe global economic slump it sees extending into 2010.

‘’Given the anticipated weakness in the global economy over the next two years, consideration should be given to providing fiscal stimulus that goes beyond the measures already announced,’’ the IMF said in a report.

Since last October, the IMF has urged governments to inject public money into their economies to stimulate growth as a weapon against a global slowdown that appears increasingly likely to endure for a while.

‘’It is essential in our view that public sector authorities play their appropriate role in preventing a collapse of confidence in the private sector that might lead to a vicious downward spiral,’’ the Washington-based institution said.

‘’Fiscal authorities have acted globally, but so far the stimulus packages outside the United States have largely been front-loaded by concentrating spending in 2009, with much less to come in 2010,’’ the IMF said in the report.

The United States in February launched a staggering $787-billion stimulus package in which nearly half the spending is budgeted for the country’s fiscal 2010, which starts on October 1.

‘’If there is enough fiscal space to do so without endangering the sustainability of government debt, consideration should probably be given to additional fiscal stimulus packages,’’ the IMF said.

The report, titled ‘’The Case for Global Fiscal Stimulus,’’ was published as part of preparations for the summit of the Group of 20 developed and developing countries in London on April 2.

The summit is a follow-up to the emergency G20 summit in November in Washington aimed at battling the accelerating global financial crisis and intensifying economic deterioration.

‘’Given the likelihood that the economic weakness will continue into 2010, there should be less concern that the expenditures will only be put into place once the economy has begun to recover,’’ the 185-nation institution said.

In January, the IMF published economic forecasts revised sharply lower that showed the global economy growing at a mere 0.5 percent annual pace this year and 3.0 percent in 2010.

The hard-hit advanced economies were forecast to contract 1.7 percent this year before a recovery to a 3.0 percent growth rate.

But IMF managing director Dominique Strauss-Kahn warned Tuesday that the numbers would be revised lower again in April.The IMF recalled that not all countries have the same scope for taking such measures.

’Countries with lower debt, and especially countries that are paying a low interest rate on their debt, have relatively more room to expand their fiscal policy,’’ he said at a news conference.

Asked which countries the IMF views as best-positioned to launch new stimulus, Cottarelli declined to comment.