International Monetary Fund Says World Economy Will Shrink This Year

This is the VOA Special English Economics Report.

The World Bank and the International Monetary Fund will meet in Washington, DC Saturday and Sunday. One subject for discussion will be falling expectations for world economic growth.

A new report by the IMF estimates that the world economy will shrink by one and three-tenths percent this year. That would be the worst performance in more than sixty years. Three months ago, the IMF predicted a small growth for this year.

Major industrialized economies are expected to see the biggest decreases, shrinking by almost four percent. The IMF predicts developing economies will continue to grow for the year, but only by about one and one-half percent.

The IMF says the world will slowly return to growth of almost two percent next year. But the lending organization warns that strong policies to supervise and support the financial system are needed if the world economy is to fully recovery.

Olivier Blanchard is the chief economist for the IMF. He has said that banks are still in the process of rebuilding their financial positions. He added that securities markets are still operating poorly.

Economic experts believe the world financial industry is moving towards recovery but with more losses to come. In all, the IMF says worldwide financial losses could be as high as four trillion dollars by the end of next year. World trade is expected to drop eleven percent this year, after expanding by three percent last year.

The IMF report says international lending may not fully recover until two thousand eleven. The financial crisis has made the IMF more important than ever. The world's largest economies promised to increase the size of the fund by about five hundred billion dollars. They did so at the G-Twenty meeting in London earlier this month. This week, President Obama proposed that the United States lend the IMF one hundred billion dollars as part of that promise.

Last week, Mexico became the first nation to borrow from the IMF under a new program to provide emergency credit to nations with strong economies. Mexico received a forty-seven billion dollar line of credit for one year. Poland and Colombia are also seeking loans from the program.

And that's the VOA Special English Economics Report, written by Mario Ritter. You can find more financial news, plus transcripts and archives of our programs at voaspecialenglish.com. I'm Steve Ember. Transcript of radio broadcast: 23 April 2009