The International Monetary Fund has forecast a severe global contraction this year, sharply downgrading the already bleak outlook it issued three months ago.
In its latest World Economic Outlook, the IMF said the global economy is likely to contract 1.3% this year in the deepest post-World War II recession by far.
It has urged governments to take forceful action to ensure the world economy's recovery from a severe recession.
The organisation blames what it calls the deepening financial hole caused by losses from banks and other financial institutions as a result of bad loans.
It says these losses could amount to $US4.1 trillion, and banks are likely to need to raise $US875 billion in fresh capital.
Growth is set to re-emerge at a sluggish 1.9% in 2010 but the pick-up depends on aggressive measures to repair a poorly functioning financial system.
Just three months ago, the IMF had projected global growth of 0.5%, although last month it warned of a deep recession.
