The New Nation - Internet Edition

NATION BUSINESS REPORT

Global leaders need to urgently step up their coordinated response to the global financial crisis, as bank losses top $1 trillion and the world economy heads into the worst recession in modern times, the managing director of the Institute of International Finance said Thursday.

"This is a globally synchronized recession, it requires a globally coordinated approach," said Charles Dallara at a press conference to discuss the financial industry group's latest economic forecasts. "We have seen some indications and recognition of that, but not enough."

In its gloomy assessment, the IIF forecasts a 0.4% contraction in the world economy next year, following an estimated 2% expansion in 2008.

Mature economies will lead the way into the recession, expected to decline 1.4% in 2009, while emerging markets are forecast to grow 3.1%. The euro-zone economy is forecast to contract 1.5%, with the U.S. economy seen declining 1.3% and Japan falling 1.2%.

Dallara said it is important for the U.S., Europe and Japan to coordinate on a broad range of responses, from fiscal and monetary stimulus to a more aggressive effort to shore up financial institutions.

Emerging economies increasingly caught up in the turmoil will also need greater assistance, especially from the International Monetary Fund, World Bank and other multilateral institutions, he said. Dallara also recommended that central banks in advanced countries should also consider expanding swap lines.