The International Monetary Fund on Thursday forecast advanced economies would contract next year for the first time since World War II and called for government spending to battle the global financial crisis.
In sharp downward revisions to its last economic projections made less than a month ago, the IMF said the advanced economies were now seen shrinking by 0.3 percent in 2009, instead of the prior estimate of 0.5 percent growth.
It lowered its global economic growth forecast by 0.8 point to 2.2 percent.
"Prospects for global growth have deteriorated over the past month, as financial sector deleveraging has continued and producer and consumer confidence have fallen," the IMF said.
"In advanced economies, output is forecast to contract on a full-year basis in 2009, the first such fall in the post-war period," the 185-nation financial institution said in an update of its October World Economic Outlook (WEO) report.
The IMF said the downturn in advanced economies would be "broadly comparable in magnitude" to recessions in 1975 and 1982, but that "a recovery is projected to begin late in 2009."
Next year almost all the advanced economies would contract: the United States (0.7 percent), Japan (0.2 percent) the eurozone (0.5 percent) and Britain (1.3 percent). Only Canada would resist the downturn, with 0.3 percent growth.
"Our forecasts are based on current and currently announced policies. It is likely that policies will be more expansionary than we assume," IMF chief economist Olivier Blanchard said at a news conference.
"We’ll advocate at the G20 a global fiscal expansion," Blanchard said.
IMF managing director Dominique Strauss-Kahn is to attend a finance chiefs meeting of the Group of 20 rich and emerging countries this weekend in Sao Paulo, ahead of a G20 summit convened by US President George W. Bush on November 15 in Washington.
"There is a clear need for additional macroeconomic policy stimulus relative to what has been announced thus far, to support growth and provide a context to restore health to financial sectors," the IMF said.