The IMF’s recent forecasts suggest that world output growth is going to be only 0.5% in 2009. This would be the lowest world growth since World War II.

This is primarily due to the bleak growth prospects of advanced economies and industrialised Asian economies. The former include the US, leading European economies and Japan. The latter include Hong Kong, Korea, Taiwan and Singapore. While advanced economies are projected to contract by -2.0% in 2009, industrialised Asian economies are expected to perform even worse—at -3.9%.

The above forecasts imply that neither the US nor Europe will provide any stimulus to global growth in 2009. The industrialised Asian economies are also in poor shape. These mature economies from the West and the East have provided impetus to global growth since World War II. Such stimuli have been forthcoming since business cycles have varied in nature and periodicity across different parts of the world. The current downturn, however, has business cycles synchronising in an unprecedented manner. With all these economies riding the same cycle, they have lost the capacity to act as growth engines for each other.

According to IMF projections, world output would have actually contracted in 2009 but for developing Asia. This is not to suggest that developing Asia will buck the trend. It will be a disappointing year for the region also, with growth projected at 5.5% in 2009, down from 10.6% in 2007. Most leading Asian emerging economies are expected to get pegged back. Growth in China and India is expected to moderate significantly to 6.7% and 5.1% respectively. Asean is forecasted to grow by only 2.7%. But in spite of growing at subdued rates by its standards, developing Asia will be the best performer in the world. It will be doing better than Africa (3.4%), Central and Eastern Europe (-0.4%), Commonwealth of Independent States (CIS) and the Middle East (3.9%).

The forecasts underscore a fundamental alteration in the balance of power in the world economic order, with the locus of global growth firmly shifting to developing Asia. Not only is the region expected to show some expansion in economic activity when the rest of the world is contracting, it is also expected to lead the recovery. In 2010, the world economy is projected to grow by 3.0%, while developing Asia will grow at 6.9%. China and India will again be key regional performers, supported by Asean.

The projected growth pattern shows that the crisis has hit G-8 hard. All G-8 economies—Canada, France