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World Economic Outlook

For Latin America, the growth projection have been lowered by 1. 1 percentage points in 2009, primarily because production has been hit much harder by the global trade slowdown than initially expected. However, the region is benefiting from rising commodity prices, and growth projections have been revised up by 0. 7 percentage points in 2010.

In central and eastern Europe and the Commonwealth of Independent States (CIS), the growth projection have been also revised downward by 1. 3 and 0. 7 percentage points in 2009 and upward by 0. 2 and 0. 8 percentage points in 2010, respectively. Developments differ appreciably across countries but many have been badly affected by the global financial crisis, with capital flows reversed and commodity exports sharply contracted, although the recent recovery of commodity prices is forecasted to raise demand in key CIS economies.

Growth projections for emerging Africa and the Middle East have been revised downward by 0. 3 and 0. 5 percentage points in 2009, respectively, while those for 2010 are broadly unchanged. Both regions have been more negatively affected by the drop in global trade than previously expected, with Middle Eastern oil exporters using their financial reserves to prop up domestic demand.

In order to

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sustain growth and better improve the economic conditions of advance and emerging countries, monetary policy should remain supportive until growth resumes and deflationary risks dissipate. Remaining room to cut policy rates should be exploited, while non-conventional policy measures to support credit flows should continue to be explored. In cutting policy rates, central banks must be cautious in order to

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avoid any untoward adjustment in exchange rates as well as large capital outflows.

Emerging economies also need to assess the soundness of their banking systems, especially where important segments of the corporate sector are struggling to meet payments. (www. imf. org)

REFERENCES

World Economic Outlook Update. “Contradictory Forces Receding But weak Recovery Ahead”. July 08, 2009. http://www. imf. org/external/pubs/ft/weo/2009/update/02/index. htm#P25_3453 Gross Domestic Product, 1st quarter 2009 (Final). June 25, 2009. http://www. bea. gov/newsreleases/national/gdp/gdpnewsrelease. htm

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