HELSINKI, Oct 10: Japan, Europe and America might face slight recession in the second half of this year and confidence in the sound fundamentals of the world economy needs a boost, the head of the IMF Horst Koehler said here on Wednesday.

But Japan was bound for recession.

Germany and other countries in Europe would not see strong growth in the third quarter and fourth quarter, he told a press conference.

But despite this the strong fundamentals of the European economy should not be overlooked, he said.

Before the terror attacks in the United States last month, the IMF’s growth forecast for the global economy was 2.6 percent for 2001, but Koehler said that this would now be revised downwards.

Certainly, there will be a revision of this forecast in the next weeks, for the moment it is still premature to go out with new forecast numbers, because we do not yet have the data basis for that.

Koehler commended the willingness of Japanese Prime Minister Junichiro Koizumi to clean up non-performing loans held by Japanese banks but said that the Japanese economy was contracting this year.

In Japan, there will be a recession, of the magnitude of possibly between a half and one percentage point this year, he said.

The US economy was suffering from a bigger-than-expected slowdown, Koehler said, adding that he saw light at the end of the tunnel.

In the United States, after the flat development in the third or fourth quarter, possibly even with a slight retraction, we will see a recovery, at the latest in the second quarter next year, Koehler said.

The issue now is how to respond to this huge level of uncertainty, how to build up or restore confidence, he said.

Short-term spending or even an short-term easing of monetary policy was not enough to boost confidence.

It is very important that nothing is done in this situation which leaves a new problem after six months, or maybe one or two years.

He also saw a need in Europe to take stronger measures to fight the downwturn of the global economy.

He said: Europe has for too long underestimated the negative spillover of the slowing down of the economy in the US and elsewhere, in Asia.

And I hope that this now has ended and that there is awareness in Europe, in the euro-zone countries, that they need themselves to do something to strengthen growth and job creation and not only rely on the United States and its recovery.

Koehler was on a short visit to the Nordic country which currently is the representative of the Baltic and Nordic countries on the IMF’s board. —AFP