IMF: World economy will drop by 1% in 2009 with recovery to come in 2010

Managing Director of the International Monetary Fund Dominique Strauss-Kahn said that the world economy will likely decrease 0.5 or 1 percent during 2009, reports Reuters. Meantime the recovery is expected to come in the first quarters of 2010.

"If ... economic policies are appropriate, the recovery should come in the first two quarters of 2010," he told Spanish newspaper El Pais.

Additionally Strauss-Kahn also said that perhaps the European Central Bank could try to purchase assets with newly created money to boost the money supply.

"I'm sure that, if necessary, it will not hold back, but be active against a fall in prices," he said.

Besides, Strauss-Kahn touched upon the economy of Spain saying that while the country was not directly exposed to U.S. toxic assets it still created its own. He expressed his concern about ‘the real-estate boom in Spanish banking system’ saying that he is worried about it more than the direct impact of U.S. toxic assets.

While there are banks that will need government help in Spain the national system still remains healthy. On Sunday Spain launched its first bank rescue program to prevent solvency problems at unlisted savings bank Caja Castilla la Mancha (CCM).