The International Monetary Fund today forecast what amounts to a global recession for this year and next and admitted that making economic projections after the September 11 attacks was like trying to read tea leaves.
At a news briefing to preview this weekend's IMF meeting in Ottawa, IMF Managing Director Horst Koehler forecast world economic growth of 2.4 per cent for both this year and 2002.
While Mr Koehler said he did not see that forecast as indicative of a global recession, most economists view world economic growth below 2.5 per cent as recessionary.
The latest estimates from the fund were much lower than the 2.6 per cent growth for this year and 3.5 per cent expansion next year that it forecast in October in a report compiled too late to gauge the full impact of the September 11 attacks on the World Trade Center and the Pentagon.
"We have to recognize that we face an extraordinary degree of uncertainty in the aftermath of the September 11 attacks. There is no real precedent for this situation, which makes forecasting based on previous experience look something like trying to read the tea leaves," Mr Koehler said.
The international lender said the global economic situation was difficult but manageable and insisted it still sees a recovery next year despite an extraordinary degree of uncertainty. Growth forecasts were slashed for all three major economic powers - the United States, Europe and Japan.
US growth is now forecast at 1.1 per cent this year and just 0.7 per cent in 2002, down from October estimates of 1.3 per cent and 2.2 per cent, respectively.
Growth in the European Union is now seen at 1.7 per cent and 1.4 per cent for 2001 and 2002, down from the earlier forecast of 1.8 per cent this year and 2.2 per cent next year.
And Japan is seen in outright recession both this year and next, with contractions of 0.9 per cent in 2001 and 1.3 per cent in 2002, compared with an earlier expectation of a 0.5 per cent contraction this year and 0.2 per cent growth in 2002.