IMF Europe director Antonio Borges warned on Wednesday that a global recession in 2012 “can’t be ruled out,” citing a possibility that “activity will turn downwards.”
The IMF released its economic outlook for Europe in Brussels, at a time when the eurozone sovereign debt crisis is mutating into a new banking crisis, and “therefore we recommend changing economic policy” away from austerity and back towards stimulus, the 100-page report said.
Borges said there had been a major change in market sentiments in recent months, and “many investors all over the world became far more risk averse than before.”
He added: “We still predict growth in 2012, but very modest,” with the probability the economy will “stall” by year-end making recession a live threat, especially in Europe.
Changes in fiscal policy would be required, Borges said.
“If ever there was a more significant recession in Europe — I hope that is not the case but we cannot exlude it — then we might have changed recommendations,” he said.
“All those countries with fiscal leeway might want to consider that,” he said, though he specifically ruled out Italy and Spain.
IMF warns global recession in 2012 ‘can’t be ruled out’
