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IMF warns global recession in 2012 'can't be ruled out'

Global body advises a turn from austerity back towards stimulus but says a year-end recession is a live threat

AFP, Wednesday 5 Oct 2011
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IMF Europe director Antonio Borges warned on Wednesday that a global recession in 2012 "can't be ruled out," citing a possibility that "activity will turn downwards."

The IMF released its economic outlook for Europe in Brussels, at a time when the eurozone sovereign debt crisis is mutating into a new banking crisis, and "therefore we recommend changing economic policy" away from austerity and back towards stimulus, the 100-page report said.

Borges said there had been a major change in market sentiments in recent months, and "many investors all over the world became far more risk averse than before."

He added: "We still predict growth in 2012, but very modest," with the probability the economy will "stall" by year-end making recession a live threat, especially in Europe.

Changes in fiscal policy would be required, Borges said.

"If ever there was a more significant recession in Europe -- I hope that is not the case but we cannot exlude it -- then we might have changed recommendations," he said.

"All those countries with fiscal leeway might want to consider that," he said, though he specifically ruled out Italy and Spain.

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