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The people at the International Monetary Fund say that the world economy will be in a recession in 2009, making them the last group on earth to acknowledge it.

"World growth is projected to slow from 5 percent in 2007 to 3¾ percent in 2008 and to just over 2 percent in 2009, with the downturn led by advanced economies."

"The U.S. economy will suffer, as households respond to depreciating real and financial assets and tightening financial conditions. Growth in the euro area will be hard hit by tightening financial conditions and falling confidence. In Japan, the support to growth from net exports is expected to decline."

"The downward revisions to 2009 real GDP growth projections are somewhat larger in emerging and developing economies, averaging 1 percent. This would leave their growth rate at 5 percent."

"Markets have entered a vicious cycle of asset deleveraging, price declines, and investor redemptions. Credit spreads spiked to distressed levels, and major equity indices dropped by about 25 percent in October. Emerging markets came under even more severe pressure. Since the beginning of October, spreads on sovereign debt doubled, returning to 2002 levels."

"Financial conditions continue to present serious downside risks. The forceful policy responses in many countries have contained the risks of a systemic financial meltdown. Nonetheless, there are many reasons to remain concerned about the potential impact on activity of the financial crisis. The process of deleveraging could be more intense and protracted than factored into these projections. Intense deleveraging could also increase the risks of substantial capital flow reversals and disorderly exchange rate depreciations for many emerging economies. Another downside risk relates to growing risks for deflationary conditions in advanced economies, although these are still small, given well-anchored inflation expectations."

Douglas A. McIntyre