The global economy is likely to shrink this year for the first time since World War II.

The International Monetary Fund projected the 1.3 percent drop in a dour forecast released Wednesday. That could leave at least 10 million more people around the world jobless, some private economists said.

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The new forecast of a decline in global economic activity for 2009 is much weaker than the 0.5 percent growth the IMF had estimated in January.

Big factors in the gloomier outlook: It's expected to take longer than previously thought to stabilize world financial markets and get credit flowing freely again to consumers and businesses. Doing so will be necessary to lift the U.S., and the global economy, out of recession.
The report comes in advance of Friday's meetings between the United States and other major economic powers, and weekend sessions of the IMF and World Bank. The talks will seek to flesh out the commitments made at a G-20 leaders summit in London last month, when President Barack Obama and the others pledged to boost financial support for the IMF and other international lending institutions by $1.1 trillion.

The IMF's outlook for the U.S. is bleaker than for the world as a whole: It predicts the U.S. economy will shrink 2.8 percent this year. That would mark the biggest such decline since 1946.
Among the major industrialized nations studied, Japan is expected to suffer the sharpest contraction this year: 6.2 percent. Russia's economy would shrink 6 percent, Germany 5.6 percent and Britain 4.1 percent. Mexico's economic activity would contract 3.7 percent and Canada's 2.5 percent.

Global powerhouse China, meanwhile, is expected to see its growth slow to 6.5 percent this year. India's growth is likely to slow to 4.5 percent.

All told, the lost output could be as high as $4 trillion this year alone, U.S. Treasury Secretary Timothy Geithner estimated.

Besides trillions in lost business, a sinking world economy means fewer trade opportunities and higher unemployment. It raises the odds more people will fall into poverty, go hungry or lose their homes. And while keeping a lid on interest rates and consumer prices, the global recession increases the risk of deflation, which would drag down prices and wages, making it harder for people to make payments on their debt.