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Business

IMF Predicts Recession

World finance leaders meeting in Ottawa have shifted their attention to helping poor countries. But the devil lay in the detail. The debate raged over the appropriate form of aid in the face of a global recession.

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Grappling with a new world order

Finance ministers and central bankers from around the world met to discuss the actions the IMF would take in the months ahead to try and counter the uncertain global economic outlook.

In a show of unity, they agreed on the need to help the world’s poorest countries more. They promised to cut interest rates further if needed to bolster a bleak world economy. But there were no pledges for extra money to help the poorest of the poor.

World economy on shaky ground

Even before the terrorist attacks on New York's World Trade Center and the Pentagon, the world economy was on shaky ground. But the attacks severely dented the tourism and insurance industries as well as hurting consumer confidence, raising fears of the first global recession since the early 1990s.

As a result, the IMF has slashed its growth forecasts, predicting what some say amounts to a global recession.

World growth of 2.4 percent is expected for this year and next, about half the 4.7 percent seen in 2000, and a level amounting to a recession according to economic commentators

Agreement without accord

The world has changed since the attacks of September 11. "The notion of two worlds, rich and poor...collapsed at the time the World Trade Center collapsed", the World Bank President James Wolfensohn said. "Aid can now be justified on the grounds of "self interest", Wolfensohn added.

But how the world's richest nations should help the poor remains a bone of contention. International Monetary Fund Managing Director Horst Koehler weighed in on the issue over the weekend, bluntly accusing rich nations of being selfish.

"There is a major problem in the fight against poverty and this is the selfishness of the advanced countries," Koehler said. He urged an increase in development aid provided by rich countries.

Last year, official aid from the world's rich nations fell to its lowest level ever at 0.22 percent of economic output, according to the charity, Oxfam. That falls well short of the 0.7 percent recommended by the United Nations.

The world's richest nations have long agreed that they want to halve the number of people living in poverty by 2015. But there was little progress in Ottawa on how that can be achieved.

The conclusion after a weekend of talks was that the attacks on the US on September 11 are likely to worsen poverty in many developing countries.

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