IMF says world economy in severe recession

By Lesley Wroughton

The International Monetary Fund said on Wednesday the world economy has fallen into a severe recession, cutting its forecast for global growth and calling for forceful action to spur a recovery.

In its latest World Economic Outlook, the IMF said the global economy would likely contract 1.3 percent this year in the deepest post-World War Two recession by far.

The Fund warned that the turnaround depends on efforts by governments to nurse the global financial sector back to health by cleaning banks' balance sheets, and on additional fiscal and monetary policies in advanced economies.

EPICENTER OF CRISIS

The IMF said the United States remains at the epicentre of the crisis and said it is critical U.S. authorities address mounting toxic debt and uncertainty about banks' solvency.

It revised down its forecast for the U.S. to a 2.8 percent contraction this year and no growth in 2010 as the ravages of a credit squeeze, falling house and equity prices and high levels of uncertainty play out.