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UK the worst of a bad lot as the International Monetary Fund (IMF) anticipates a Global downturn for 2009

World economic growth is set to fall to just 0.5% this year, its lowest rate since World War II, a spokesman from the International Monetary Fund (IMF) warned at the current IMF annual conference being held in Davos, Switzerland. The conference, where most of the rising starts of last year's conference were conspicuous by their absence, appeared to take no pleasure in announcing that the UK is expected to be the hardest hit with economical shrinkage of 2.8% forecasted for 2009, the highest rate amongst the developed countries.

A sign that the global economy has taken a very sharp turn for the worst is that as recently as October 2008, the IMF were still predicting that world output would increase by 2.2% in 2009.

During the conference, Pascal Lamy, the director general of the World Trade Organization, urged countries not to resort to protectionism as such a move would be "a big mistake".

The feeling amongst participants at the conference was that the need is now for international co-operation to draw up new policy initiatives, and to continue with the policy of capital injections to support "viable financial institutions".

Overall the IMF predicts that the EEC economy is poised to shrink by an average by 2.0% and the US economy by 1.6% in 2009

The IMF says future coordinated financial policies should concentrate on recognising the scale of financial institutions' losses and on providing public support to those institutions that are viable. UK financial regulator calls for world watchdog

Britain's top financial regulator said Wednesday institutions such as the International Monetary Fund must tackle the economic crisis, but that global rules — and perhaps even a world regulatory body — will be needed eventually.

Britain's Financial Services Authority chairman Adair Turner acknowledged, however, that any changes would require time.

"In the long term, we will need to head towards some sort of treaty-based organization which has similar powers in relation to financial regulation that the WTO has in trade," Turner told government and business leaders at the World Economic Forum. "I do not think there is any chance of it happening anytime soon. In the short-term — over the next two to three years — we simply have to put the energy and the political leadership into making the existing architecture work as best as possible,".

Combating the crisis will require banks to keep a bigger cushion to ensure that ample cash is always available for transactions.

Government and business leaders must use the Washington-based IMF and bodies like the Financial Stability Forum, created in the wake of the 1998 financial crashes that brings together the central banks, national regulators as well as treasury officials from the world's 10 wealthiest nations.

The extent of the international financial crisis was further emphasized by the findings of a report issued on Wednesday that the crisis will eventually lead to the loss of more than fifty million jobs in 2009 alone. The report issued by the International Labour Organization stated that optimistic forecasts that growth in developing nations would continue at a steady pace. The positive growth of developing nations such as China and India would more than offset the less than encouraging negative growth that Japan, Spain the US and UK were experiencing. However the sharp fall in consumer demand in the West had put paid to that theory.