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Global economy to contract 1.3 pct in 2009

WASHINGTON - The global economy will contract 1.3 percent this year because the stabilization of financial markets will take longer than previously expected, the International Monetary Fund forecast Wednesday.

“The global economy is in a severe recession inflicted by a massive financial crisis and acute loss of confidence,” the IMF said in its semi-annual World Economic Outlook (WEO) report.

The IMF warned it outlook was “exceptionally uncertain,” with risks weighing on the downside, in its assessment that the world economy was sliding into “the deepest post-World War II recession by far.”

“The global economy is in a severe recession inflicted by a massive financial crisis and acute loss of confidence,” the IMF said in its semiannual World Economic Outlook (WEO) report.

The IMF warned the outlook was “exceptionally uncertain,” with risks weighing on the downside, in its assessment that the world economy was sliding into “the deepest post-World War II recession by far.”

It was the third time the IMF has slashed its 2009 world growth estimate this year. In January, the multilateral institution saw growth of 0.5 percent, but by March it had forecast a contraction of between 0.5 percent and 1.0 percent.

“Underlying the downgrade to the current forecast is the recognition that financial stabilization will take longer than previously envisaged, given the complexities involved in dealing with bad assets and restoring confidence in bank balance sheets, especially against the backdrop of a deepening downturn in activity that continues to expand losses on a wide range of bank assets,” the 185-nation institution said.