WORLD trade collapsed by nearly 45 per cent in annual terms in the final three months of last year, according to new International Monetary Fund figures that expose the staggering depth of the global financial crisis.
And the IMF has predicted dealing with the economic storm will force governments to drive their budgets deep into deficit, indicating that Australia could expect a $35 billion deterioration in its budget bottom line.
The bleak assessment, released early this morning, declares the global economy is in the grip of a ‘‘pernicious feedback loop’’ triggered by the collapse of credit and stock markets and warns there will be no recovery until governments take forceful action to restore confidence in financial markets.
‘‘Downside risks continue to dominate, as the scale and scope of the current financial crisis have taken the global economy into uncharted waters,’’ the report says.
Falling share and property prices are forcing businesses and households to cut their spending, while new credit has been choked.
‘‘Global output and trade plummeted in the final months of 2008,’’ it says.
The advanced countries are expected to produce 2 per cent less this year than last year, with world trade volumes to drop by 2.8 per cent.
‘‘Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy,’’ the IMF report says.
It calls upon nations to coordinate their economic rescue packages. Kevin Rudd held his first direct conversation with US President Barack Obama yesterday morning to discuss the crisis.
Wayne Swan said yesterday that figures detailing the extent of the downturn late last year were only just now being released, but said the Government was prepared to act. ‘‘ One of the things that this Government does is that it gets ahead of the game,’’ the Treasurer said.
Mr Swan said that, although Australia’s economy was better placed than most countries, it could not resist the pull of international forces.
‘‘Against the sobering backdrop of a global recession and collapsing commodity prices, it is inevitable that Australian jobs and growth will be affected,’’ he said.
The IMF stresses the importance of government action to reverse the economic slide. It says growth could start to recover late next year, with 3 per cent world growth possible.
‘‘The outlook is highly uncertain, and the timing and pace of the recovery depend critically on strong policy actions.’’
The IMF says that timely budget stimulus packages had to provide a key support to world growth, with any delays likely to worsen prospects. It says such packages should be temporary and allow for deficits to be eliminated once conditions improve.
The IMF acknowledges that countries face a dilemma in responding to the crisis, as budget stimulus packages run the risk of generating unsustainable budget deficits. However, it says there is a risk that the world economy would be even worse than forecast unless ‘‘ stronger financial strains and uncertainties are forcefully addressed.’’
The IMF forecasts that advanced countries will average budget deficits equivalent to 7 per cent of GDP this year.
In Australia, that would be equivalent to a deficit of around $80 billion, out of a total budget of $300 billion.
Australia’s deficit will not sink that far, as its starting point is much better than most other developed countries, however, the IMF calculations suggest that a $35 billion deterioration in the budget bottom line should be expected.
The IMF says the threat of inflation has disappeared under the weight of the global downturn, and is now being supplanted by a risk of deflation.
Rs 500 laptop display on Feb 3
NEW DELHI: A $10 laptop (Rs 500) prototype, with 2 GB RAM capacity, would be on display in Tirupati on February 3 when the National Mission on
Education through Information and Communication Techology is launched.
The $10 laptop project, first reported in TOI three years ago, has come as an answer to the $100 laptop of MIT’s Nicholas Negroponte that he was trying to hardsell to India. The $10 laptop has come out of the drawing board stage due to work put in by students of Vellore Institute of Tecnology, scientists in Indian Institute of Science, Bangalore, IIT-Madras and involvement of PSUs like Semiconductor Complex. “At this stage, the price is working out to be $20 but with mass production it is bound to come down,” R P Agarwal, secretary, higher education said.
Apart from questioning the technology of $100 laptops, the main reason for HRD ministry’s resistance to Negroponte’s One Laptop Per Child (OLPC) project was the high and the hidden cost that worked out to be $200.
The mission launch would also see demonstration of e-classroom, virtual laboratory and a better ‘Sakshat’ portal that was launched more than two years ago. Sources also said that the ministry has entered into an agreement with four publishers — Macmillan, Tata McGraw Hill, Prentice-Hall and Vikas Publishing — to upload their textbooks on ‘Sakshat’. Five per cent of these books can be accessed free.
The mission, with an 11th plan outlay of Rs 4,612 crore, is aimed at making a serious intervention in enhancing the Gross Enrolment Ratio in higher education. The mission has two major components. One, content generation through its portal ‘Sakshat’, and two, building connectivity along with providing access devices for institutions and learners.
In this context, government would give Rs 2.5 lakh per institution for 10 Kbps connection and subsidise 25% of costs for private and state government colleges.
The mission would seek to extend computer infrastructure and connectivity to over 18,000 colleges in the country, including each department of nearly 400 universities and institutions of national importance. The mission would focus on appropriate e-learning procedures, providing facility of performing experiments through virtual laboratories, online testing and certification, online availability of teachers to guide and mentor learners, and utilization of EduSat and DTH.