IMF issues stark warning to bullish commentators

As the leaders of the world’s largest economies get ready for next week’s IMF meeting in Washington, it warns that the current global recession is likely to be “unusually long and severe, and the recovery sluggish.”

The latest statement from the International Monetary Fund (IMF) will shock many commentators who have seen glimmers of hope this week.

However, the IMF said “slowdowns linked with financial crises tend to be severe, while synchronised slowdowns last longer.“

However, on a positive note the IMF believes that if Government spending increases, the recession will be less severe.

The IMF recently revised its forecast for world growth this year to 0.5% - the lowest since World War II.

Worryingly, the IMF is forecasting that developing economies may face shortages of investment for many years to come since banks in wealthy countries are struggling to survive.

In the meantime, there have been glimmers of hope this week after US President Barack Obama suggested that the US economy is seeing signs of progress.

US Federal Reserve chairman, Ben Bernanke, echoed Mr Obama’s comments and said the recession is easing.

Meanwhile in the UK, Morgan Stanley economist David Miles, believes that the worst of the recession may be over.

Mr Miles, who will join the Bank of England’s Monetary Policy Committee in June, said that interest rate cuts and quantitative easing are likely to have a “substantial” impact on economic recovery.

Furthermore, a poll this week from the Royal Institution of Chartered Surveyors (Rics) revealed that housing market activity is picking up after new enquiries increased for the fifth month in a row.

Rics said interest from potential buyers is starting to gain “real momentum” as new buyer enquiries are growing at their fastest pace since September 2003.

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