From Recession to Recovery: How Soon and How Strong?

FMI: "Recessions associated with financial crises tend to be severe. Recoveries from such recessions are typically slow."

Thursday, April 16, 2009

If such recessions are globally synchronized then they tend to last even longer and be followed by recoveries that are even weaker.

Countercyclical policies can be helpful in ending recessions and strengthening recoveries. In particular, expansionary fiscal policies seem particularly effective. Monetary policy can help shorten such recessions, but is less effective than usual.

These findings suggest that the current recession is likely to be unusually long and severe, and the recovery sluggish. However, strong countercyclical policy action, combined with action to restore confidence in the financial sector, could improve prospects for recovery.

More on this topic

IMF: Time is running out for Costa Rica

March 2016

The institution is once again emphasizing more efficient public spending and making cuts before a fiscal adjustment comes into force, in a form that is "draconian and with emergency measures".

Making cuts and improving efficiency in public spending is once again the main recommendation of the International Monetary Fund.

From Recession to Recovery: How Soon and How Strong?

April 2009

FMI: "Recessions associated with financial crises tend to be severe. Recoveries from such recessions are typically slow."

If such recessions are globally synchronized then they tend to last even longer and be followed by recoveries that are even weaker.

Countercyclical policies can be helpful in ending recessions and strengthening recoveries.

Fitch: Latin American Sovereign Outlook 2009

March 2009

Fitch expects that Latin America’s real GDP will contract by 0.9% in 2009, with Brazil’s economy stagnating at best and Mexico contracting by over 2%.

Latin American economies have recoupled with the crisis in the developed economies. Since September 2008, Latin American countries have been buffeted by stronger external headwinds, as evident from the fall in regional currencies and stock markets and from widening bond spreads.

World Economic Outlook Update

January 2009

Global Economic Slump Challenges Policies. World growth is projected to fall to ½ percent in 2009, its lowest rate since World War II.

Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy. A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit markets are unclogged.

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