LAST October the IMF predicted world output would increase by 2.2 per cent in 2009.
Yesterday it changed its tune saying that world output is set to grow by just 0.5 per cent, ‘strangled’ by more than $2 trillion of bad banking assets in the United States.
It stated that Bank losses worldwide from ‘toxic’ US assets may reach $2.2 trillion.
The report estimates that write-downs and losses at banks totalling $1.1 trillion so far are only half of what’s to come, and that already contracting economies may worsen on the road to catastrophe.
The IMF advocates that advanced and developing countries need to be ‘even more supportive’ of demand than they already have been, with lower interest rates and fiscal stimuli the rule.
It predicts that if this does not happen there will be even more ‘toxic effects on global growth’.
The UK is very close to the epicentre of the storm with the IMF predicting that its economy will shrink by a massive 2.8 per cent this year, the worst contraction among all of the advanced nations.
It predicts that the eurozone economy is poised to shrink by 2.0 per cent in 2009, the US economy by 1.6 per cent, Japan by 2. 6 per cent, with Germany facing almost as big a contraction of its economy as the UK.
The report comes on the same day the International Labour Organisation said that as many as 51 million jobs worldwide could be lost this year because of the global economic crisis.
Developed economies such as Japan, Spain, the US and UK are slumping, with mass sackings being announced on a daily basis.
The IMF says that growth in emerging and developing economies is expected to slow sharply, from 6.25 per cent in 2008 to 3.25 per cent in 2009.
The independent Institute for Fiscal Studies (IFS), a bankers’ think tank, also issued its prognosis yesterday.
It finds that the UK government debt will remain above pre-crisis levels for 20 years, and that the government will need to raise taxes or cut spending by an extra £20bn to start repairing the public finances.
It suggests that the government may have to freeze public spending in 2010, and that an increase in vat and its imposition on food and children’s clothing may be necessary.
The government currently projects a budget deficit exceeding £100bn in the next year.
It finds that the credit crunch and massive unemployment will cost the Chancellor £50bn a year in lost tax receipts and higher social security spending.
The government is on record in its pre-Budget report (PBR) in November as stating that it will implement spending cuts and tax increases adding up to £38bn by 2015-16.
The IFS points out that even if everything goes according to plan in the best of all possible worlds, it will be ‘the early 2030s before debt returns below the ceiling of 40 per cent of national income’ that Gordon Brown set as one of his key fiscal rules in 1997.
At the best, there is to be over 20 years of privation, unemployment and massive cuts in the standard of living of the working class.
None of the reports is able to deal with the political implications of the deepening slump, the savage cutbacks at home, and the imperialist drive to go from slump to a new imperialist war to redivide the world.
What is crystal clear from the reports is that capitalism is in its death agony, and if allowed to, will completely destroy the productive forces, as it disintegrates.
It is a system that can no longer bring progress or extend civilisation.
It was Marx who identified the working class as the gravedigger of the capitalist order.
Now is the time to build the Fourth International to mobilise the workers of the world to carry out the world socialist revolution.