Global economy to shrink for first time in 60 years

The IMF has said the global economy would shrink in 2009 for the first time in 60 years, as EU leaders balked at pressure to boost spending and the crisis brought a million angry French workers to the streets.

Meanwhile, the head of the OECD Angel Gurria said yesterday that the world economy is likely to shrink in 2009 despite growth in China and India.

"Global economic activity is falling -- with advanced economies registering their sharpest declines in the postwar era -- notwithstanding forceful policy efforts," the International Monetary Fund said in an interim update of its world outlook.

It slashed its forecasts to a global contraction of 0.5 to 1.0 percent, sharply lower than the 0.5 percent growth given only on January 28.

Advanced economies are expected to suffer "deep recessions" in 2009, shrinking between 3.0 and 3.5 percent, while growth will slow sharply in developing countries.

The IMF also warned that the Group of 20 developed and emerging major economies had not done enough to fight the recession.

"Country responses to the global crisis are in an early stage... measures are still needed to restore financial stability," the IMF said, adding that a projected 2010 recovery depended on comprehensive policy steps.

Meanwhile, EU leaders rejected pressure to pump more taxpayer cash into their faltering economies.

German Chancellor Angela Merkel insisted in parliament that the EU was already spending enough to fight the recession.

"We are in the vanguard. We are contributing an above-average amount," she said. "The current measures must work. We must allow their impact to develop."

The 27-nation European Union has adopted stimulus measures for 2009 and 2010 worth 400 billion euros (520 billion dollars), equivalent to 3.3 percent of the bloc's gross domestic product.

"I am against us Europeans (responding to) the American wish for a more voluminous economic recovery package," Luxembourg's Prime Minister Jean-Claude Juncker said.

Washington, citing its own efforts, has pressed its European allies in the run-up to a G20 summit in London on April 2 to play a bigger role in reviving global demand by doing more to prop up their own faltering economies.

In France, more than a million angry French workers took to the streets in a nationwide strike to force President Nicolas Sarkozy to boost wages and protect jobs as the economic crisis deepens.

"Sarkozy has to take from the billionaires and give a bit back to the poor," said teacher Jean-Baptiste Voltuain, echoing mounting calls for the right-wing government to boost social spending by hiking taxes on the rich.

Voltuain was one of the marchers at a rally in Paris which was fronted by the leaders of France's eight main unions as it snaked its way through the east of the city in warm spring sunshine.

The CGT union said three million people took part in protests across the country, but police put the number at 1.2 million.

A million civil servants went on strike, officials said, while protestors from both public and private sectors marched in the capital and in Marseille, Lyon, Strasbourg and around 200 other towns.

Japan said on Thursday it would spend some 15 billion dollars to help the unemployed and South Korea pledged 3.5 billion dollars to create 550,000 jobs.

WORLD ECONOMY TO SHRINK IN 2009

The world economy is likely to shrink in 2009 despite growth in Asian powerhouses China and India, the head of the OECD Angel Gurria said yesterday, warning of a first global contraction in 60 years.

"Now we are probably seeing a world which will go negative because even the positive growth of India and China is not going to be enough to offset the negative growth in (developed countries)," he told reporters in Beijing.

Gurria was replying to a question about his expectations for growth in 2009.

His remark came after the International Monetary Fund said it also believed the global economy could contract in 2009.

IMF Managing Director Dominique Strauss-Kahn said earlier this month that 2009's world economy would see the "worst performance in most of our lifetimes."

Gurria, secretary general of the OECD, also said in Friday's briefing that growth in China's economy this year would slow to 6-7 percent.

The World Bank earlier this week published a new forecast for the Chinese economy, reducing its growth prediction for 2009 to 6.5 percent from 7.5 percent.

China's economy grew 9.0 percent in 2008, according to the government, down from 13.0 percent in 2007.

Gurria said there would be "very negative" growth in Organisation for Economic Cooperation and Development countries, adding that firm estimates would be released soon.

The OECD groups 30 industrialised, democratic nations and serves as a policy adviser and forum for debate on economic and political issues.

Gurria expressed hope that a 586-billion-dollar Chinese economic stimulus package announced late last year could spur domestic demand, helping China act as a world growth engine.

"I would like this (package) to be as successful as possible because we need a few locomotives. Our traditional locomotives are all in the repair shop," he said.

"We need the aggregate demand of China and countries like India."

Gurria spoke at a briefing held to release an OECD report on China's rural development.

The global crisis has left millions of China's migrant labourers jobless, raising official fears of social instability.

China this month vowed a massive boost in spending on social welfare services aimed in large part at meeting the needs of such migrants.

The OECD report said, however, the crisis will strain China's ability to shield migrants and the rural regions that depend on their remittances from the impact of the crisis.

"The economic crisis threatens every aspect of every country in the world and therefore China and therefore the rural population of China," Gurria said.