WASHINGTON, Dec 19: The International Monetary Fund on Tuesday said following the September 11 attacks, the outlook for the global economy had deteriorated and prospects for global recovery, already bleak, had been dealt a further setback.

Feeling forced by post-September developments to release an interim version of its annual World Economic Outlook report, which is scheduled to be announced in October next year, the IMF said growth had continued to weaken in almost all major regions of the world, and its relevant projections had been marked down by 0.2 percentage points to 2.4 per cent in 2001 and by 1.1 percentage point to 2.4 per cent in 2002.

However, economic activity is expected to hold up relatively well in South Asia, including Pakistan and India, with a growth rate of 4.5 per cent to five per cent. China should bear up even well, with its economy growing by an anticipated seven per cent.

“The more robust activity among these countries,” the IMF said, “reflects the fact that they are less exposed, although not completely immune, to the downturn in global trade and activity compared with most of the smaller Asian economies. The prospective winding down of the conflict in Afghanistan and provision of large-scale international assistance for recovery should contribute significantly to growth in that country and may also boost activity in the surrounding region.” Lower oil prices could also play an important role.

For Pakistan, the projections are that real GDP will be 3.7 per cent in the current year and 4.4 per cent in 2002. Consumer prices will rise to 5 per cent next year from the current 3.8 per cent, and the current account balance as a percentage of GDP is pegged at minus 2.2 per cent against minus 2.1 per cent for the current year.

The interim report, released at a news conference at IMF headquarters in downtown Washington, cautioned that there was considerably less room for policy manoeuvre in developing and emerging markets to support growth, and stressed that there was little alternative except to implement even deeper reforms to strengthen economic fundamentals and ensure future access to finance at an acceptable spread so as to sustain growth. More generally, the report said, domestic policies should be geared to achieving early external adjustment where necessary, accompanied by structural reforms to help reduce vulnerability.

The report said the international community should provide “strong support” for such efforts through additional concessional financing for the poorest countries and improve market access to the markets of industrialized countries.