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IMF: World Economy in "Severe Recession," No U.S. Growth Through 2010

The International Monetary Fund (IMF) has downgraded its forecast for the global economy from three months ago, saying the world is in a "severe recession" and calling for strong action to jump-start a recovery. In its April 2009 World Economic Outlook, the organization says that the global economy will contract 1.3 percent this year in what it calls the deepest post-World War II recession yet. IMF predicts global growth will rebound to 1.9 percent in 2010. In January, the IMF forecast global growth for 2009 of 0.5 percent. For the U.S. economy, the IMF predicts a 2.9 percent decline in 2009 and zero growth for 2010. "Progress toward normalization of financial conditions has been much slower than envisioned a few months ago," says the report regarding the United States. The organization says the United States is the epicenter of the global crisis and that the U.S.'s most pressing policy issue is restoring the health of financial institutions and breaking the cycle of falling asset prices, rising losses in financial institutions, and tight credit. Globally, the IMF suggests that "the task is now to broaden the perimeter of regulation and make it more flexible to cover all systemically relevant institutions" and "develop a macro-prudential approach to regulation" that would include more realistic compensation structures, new accounting rules, more transparency, and better liquidity management.

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