The global economy will contract this year by 0.5 per cent, its first annual decline since 1946.

World trade will fall by 8.2 per cent in 2009.

Among the G7, Japan and Italy will be the worst affected, with a 15 and 40 per cent chance, respectively, of the recession lasting 9 quarters or more.

Fiscal and monetary easing since 2008 offset 1–1.6 percentage points of the potential declines in the G7 economies this year, except in Italy where fiscal stimulus has been minimal.

Government bond spreads in the Euro Area have widened sharply since 2007, partly due to the sudden rise in government debt.