Anne Davies, Leo Shanahan
The Age 
Friday, July 18, 2008
THE global economy is facing the toughest conditions in 25 years, federal Treasurer Wayne Swan has warned.
Mr Swan’s comments came as the International Monetary Fund released its latest economic outlook, which described the world economy as being in “a tough spot”, and said that the slowdown would be longer and deeper than forecast three months ago.
“The first-quarter slowdown was somewhat less sharp than predicted in the April 2008 World Economic Outlook,” the IMF said. “However, recent indicators suggest a further deceleration of activity in the second half of 2008. In advanced economies, business and consumer sentiment have continued to retreat, while industrial production has weakened further. There have also been signs of weakening business activity in emerging economies.”
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Mr Swan said while global inflation was on the rise, and borrowing costs had risen, Australia was well insulated. “We have highly regarded regulators and do not face the same problems being experienced in the US subprime mortgage market,” he said.
He said that the IMF’s forecasts for growth in Asian and emerging economies also remained robust. “In particular, the growth outlook for China remains supportive of continued growth in Australia,” he said.
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World growth is expected to contract from 4.8% in the fourth quarter of 2007 to 3% in the fourth quarter of 2008 before picking up to 4.3% in the final quarter of 2009.
The IMF predicts the US, which has led the slowdown among advanced economies, will continue to grow at 1.3% on an annual basis in 2008, but it says the economy will contract moderately during the second half of 2008 before gradually recovering next year.