The IMF forecast marked a dramatic downgrade of previous estimates and set the tone for the meetings of the top steering committees of the 185-member International Monetary Fund and its sister institution the World Bank.

But on Friday, the Group of Seven major economies said the worst might finally be over – although the outlook remained clouded and difficult.

“Recent data suggest that the pace of decline in our economies has slowed and some signs of stabilization are emerging,” a G7 statement said.

“Economic activity should begin to recover later this year amid a continued weak outlook and downside risks persist.”

The G7 – Britain, Canada, France, Germany, Italy, Japan and the United States – said they were “committed to act together to restore jobs and growth and to prevent a crisis of this magnitude from occurring again.”

US Treasury Secretary Timothy Geithner, the G7 host, said that “without underestimating the challenges we still face, there are signs that the pace of deterioration in economic activity and trade flows has eased.”

He too cautioned against any simple optimism that the worst global slump since the 1930s would be over quickly.

“We are right to be somewhat encouraged but we would be wrong to conclude that we are close to emerging from the darkness that descended on the global economy (in September),” he said in a statement.

A subsequent meeting of the Group of 20, which includes the G7 and developing countries such as Brazil, China, India and Russia, ended without a statement.

The financial crisis was sparked by a credit boom based on the US subprime or higher risk home loan market which collapsed in mid-2007 as weaker borrowers could not keep up payments when the economy began to slow.

Many banks were heavily exposed and in order to limit their losses, cut lending, causing the economy to slow.

An already bad situation turned much worse with the collapse of giant US investment bank Lehman Brothers in September, tightening the screw in a global credit crunch which has plunged the world economy into recession.

The more positive G7 tone follows data showing that the downturn is easing but many officials remain reluctant to give the all-clear, warning that more bad news is to come which could blight any “green shoots” of recovery.

Source: AFP