WORKING TO AVERT DEPRESSION

In its twice-yearly World Economic Outlook, the IMF slashed its 2009 forecast for world growth to 3 per cent, which would be the slowest pace in seven years, from a July projection of 3.9 per cent, and warned that a recovery would be unusually slow.

It said growth this year would come in at 3.9 per cent, a touch below the 4.1 per cent it projected in July.

While the world economy was unusually frail, Blanchard said there was little chance of a global depression, provided leaders adopt policies to address market distress.

"If the right policies are in place, then the probability of a 'Great Depression' is extremely small," he said.

Blanchard said leaders in Europe were having "some difficulty" agreeing on how to deal with the crisis but the financial markets were forcing them to move quickly.

If they succeed, "the risk of a 'Great Depression' is nearly nil," he added.

CRISIS SPREADS; EMERGING ECONOMIES HIT

The IMF blamed lax economic and regulatory policies for the current woes, saying they probably allowed the global economy to "exceed its speed limit." At the same time, market flaws combined with policy shortcomings to allow stresses to build.

Now, the world is about to pay the price.

The IMF had believed developing economies could largely steer clear of any painful spillover from the credit mess, but no longer. In its latest report, the global economic watchdog warned emerging and developing economies are also slowing, in some cases to rates well below trend.

... contd.