Reports by the World Bank and International Monetary Fund confirms what many around the world already know, that the global economy has fallen into a recession. Getting out of it again will take a global effort, too. The global economy is likely to contract by 0.5 percent in 2009, the first such downturn since World War II.
International trade and economic growth have dropped sharply following the global financial crisis, as businesses have been forced to cut back or shut down completely and consumers have curtailed spending. As the crisis has spread from advanced economies, emerging market and developing countries are experiencing a severe economic slowdown and sharp declines in capital inflows and exports.
In the same way, as many developing nations saw strong growth from rising demand during the boom times for the oil, copper and other commodities they produce, declining demand has led to significant reversals. The World Bank report notes that 94 out of 116 developing nations are seeing their economies slow, with poverty increasing in 43 of them.
This deepening global crisis calls for a global response. This weekend, the finance ministers and central bank governors of the G-20 countries will meet in London, with a two-fold agenda; to restart growth through strong macroeconomic and financial sector measures and to strengthen the financial regulatory network.
At the summit next month of the world's 20 largest developed and developing nations, the United States will work with others to come up with a coordinated response to the crisis. Forceful financial sector actions will be critical to rebuild confidence, restore market functioning, get credit flowing and bring stability to the global economy.
President Barack Obama has committed the U.S. to help lead the way, approving a $787 billion package of investments and tax cuts. Many G-20 countries have also put in place fiscal stimulus. Complementary and coordinated actions are crucial to the success of policies responding to the economic crisis.
The United States has called on the G-20 countries for substantial and sustained actions for a period matching the expected duration of the crisis, and to mobilize resources for emerging markets and developing countries to manage the effects of the crisis and restore growth.
It is important that all nations take all possible steps to shore up their economies, and in this way advance the concerted action needed to end the crisis as soon as possible.