The International Monetary Fund has unveiled a gloomy set of predictions.

It said the world economy will probably shrink this year by between 0.5 percent and one percent. That would be the first global contraction since World War Two. The IMF report – which was compiled for the recent meeting of the Group of 20 rich and emerging nations – also sees a gradual recovery next year. The euro zone’s economy will likely contract by 3.2 percent this year. US GDP is set to shrink by 2.6 percent. Japan will be worst hit with a 5.8 percent drop this year, which will be trimmed to a 0.2 percent fall next year. One reason why the euro zone will suffer so badly is that the region’s largest economy Germany will contract by over four percent this year. That is according to the latest revised forecasts from the Ifo economic research Institute. The IMF warned that Japan has a “high risk” of deflation as does the United States. It also complained that the G20 countries have not done enough to fight the recession saying more stimulus measures are needed.

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