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Wed 8 Jul 2009 10:57 PM

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IMF slashes ME growth in latest forecast

Negative impact from decline in global trade greater than previously expected.

IMF slashes ME growth in latest forecast
MIDEAST GROWTH: IMF halves growth for the region this year. (Getty Images)

The International Monetary Fund on Wednesday slashed its Middle East growth forecast for this year by half a percentage point to 2 percent from the 2.5 percent forecast back in April.Principal reason for the downgrade is due to the region being more affected by the drop in global trade than previously expected as governments have increasingly used their financial reserves to prop up domestic demand.

On the upside, however, forecast growth for 2010 was raised to 3.7 percent from 3.5 percent.

The IMF said the global economy is beginning to pull out of a recession unprecedented in the post–World War II era, but stabilisation is uneven and the recovery is expected to be sluggish.

Global economic growth during 2009–10 is now projected to be about 0.50 percentage points higher than projected in the April, reaching 2.5 percent in 2010.

In a statement it said: ''Financial conditions have improved more than expected, owing mainly to public intervention, and recent data suggest that the rate of decline in economic activity is moderating, although to varying degrees among regions.

''Despite these positive signs, the global recession is not over, and the recovery is still expected to be slow, as financial systems remain impaired, support from public policies will gradually diminish, and households in countries that suffered asset price busts will rebuild savings.''

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