The IMF warned on Tuesday the world was gripped by a “Great Recession” that could throw millions back into poverty and spark civil unrest, as the United States appealed for joint action by nations against the crisis.
“The global financial crisis, that might now be called the great recession, provides a sobering backdrop to our conference,” IMF Managing Director Dominique Strauss-Kahn told delegates at an anti-crisis meeting in Tanzania.
“The IMF expects global growth to slow below zero this year, the worst performance in most of our lifetimes,” he said, urging wealthy Western countries to maintain financial support for low-income nations.
The IMF director also said there was now “a real risk that millions will be thrown back into poverty” across the African continent and that the economic crisis raised “the threat of civil unrest, perhaps even a war”.
The worldwide recession also raised fears in Europe of a sharp erosion in public health as financially strapped patients are forced to defer care.
In Tokyo plummeting exports dragged down the Tokyo stock market to a 26-year low.
“So far, there are no visible signs of a fast recovery. The economies in industrial countries remain weak and the current crisis in Eastern Europe is a further strain,” said Simon Juncker, an analyst at Germany’s Commerzbank.
Germany too reported another sharp fall in export earnings in January, the fourth straight monthly decline.
In Washington, US Federal Reserve Chairman Ben Bernanke urged world governments to forge a common strategy to regulate the financial system in order to tackle the worst crisis since the Great Depression of the 1930s.
“We must have a strategy that regulates the financial system as a whole, in a holistic way, not just its individual components,” he told the Council on Foreign Relations.
Stock markets in most of Asia, Europe and the United States bounced back from big losses on Monday, however, boosted mostly by investors hunting for bargains and an upbeat profit report from US banking giant Citigroup.
Citigroup chief Vikram Pandit said in an internal memo obtained by AFP that the company was seeing a return to profitability in early 2009 after punishing losses last year, although he warned about continued “market volatility”.
On Wall Street, the Dow Jones Industrial Average and the Nasdaq index rocketed up 4.29 per cent and 5.85 per cent respectively in afternoon trading.
London’s FTSE 100 index of leading shares closed up 4.88 per cent, while the Frankfurt Dax gained 5.28 per cent and the Paris CAC 40 soared 5.73 per cent.
But in Tokyo, the Nikkei stock market index fell 0.44 per cent to hit its lowest reading since October 1982 on investor worries that there is no quick fix in sight for the troubles afflicting Asia’s leading economy.
China was meanwhile the source of another worrisome indicator as it reported its first drop in consumer prices – deflation – in more than six years.
Deflation, combined with recession, can sap corporate earnings, cut deeply into growth and employment and reduce consumer spending.