UK Recession To Last Until 2011: IMF

Governments need to take steps to boost growth but also tighten regulation, Lord Peter Mandelson, UK Business Secretary, told CNBC Wednesday, as the IMF forecast that the UK recession won't end until 2011, one year later than most developed economies.

"Measures are needed to get growth going again… but people are also thinking about the future," Mandelson told "Squawk Box Europe" in an exclusive interview.

There is a "fairly widespread recognition" that the changes that took place in the world economy were not accompanied by changes in regulation and governance, he added.

The International Monetary Fund expects the global economy to contract 0.6 percent this year, according to forecasts provided on Tuesday by an IMF official.

Teresa Ter-Minassian, an adviser to IMF Managing Director Dominique Strauss-Kahn, told reporters the figure was likely to be released shortly by the IMF.

It compares with the IMF's last official forecast for the global economy, released in January, which pointed to global growth of 0.5 percent.

Sharon Lorimer

The U.S. economy is seen shrinking 2.6 percent this year, compared with a January forecast of a 1.6 percent contraction.

The euro zone economy is expected to contract 3.2 percent, down from January's forecast of a 2 percent decline.

Japan's economy was seen diving 5 percent this year, sharply down from the last forecast of a 2.6 percent contraction.

Until now, all the IMF has said is that it expects global economic output to be "below zero" and Strauss-Kahn has called the current slowdown the "Great Recession".

"The scenario will be worse, but the managing director has already said this," Ter-Minassian said at a conference in Lisbon.

It is important that world economies steer clear of protectionism, however tempting it may be to shut the door on international trade, Mandelson told CNBC.

There should be no higher tariffs or other barriers raised against world trade, and failure to fight protectionism brings a risk of growth being harmed and unemployment surging, he warned.

Closing markets would trigger a "tit-for-tat retaliation" which would turn the current recession into a depression as it happened in the 1930s, Mandelson said, adding that the European Union must stand united.

"We have to be very careful that the rules of the single market that we so painstakingly put up are not eroded, that are not just tossed aside, because that would be a disaster," he said. "The last thing we want to see is the European single market going backwards."

The IMF's next official forecasts for the world economy will be released before the IMF and World Bank meetings in Washington on April 24 and 25.

Forecasts on World Economic Growth

	2009	2010
Global Economy	-0.6	2.3
United States	-2.6	0.2
Euro Zone	-3.2	0.1
Japan	-5.0	0.0
UK	-3.8	-0.2
Canada	-2.0	1.2
G7	-3.2	0.2
Asia	3.6	5.8
Latin America	-0.6	2.3

Source: IMF

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