At a press conference in Washington, D.C. today. International Monetary Fund managing director Horst Köhler revealed that the IMF has revised its global economic forecasts downward.

The IMF has cut its global forecast for this year slightly to 2.4%, but it has also dropped its 2002 forecast by 1.1% to 2.4%. “The situation is clearly difficult. But it is manageable, and we continue to expect a recovery next year,” Köhler said.

“We have to recognize that we face an extraordinary degree of uncertainty in the aftermath of the September 11 attacks. There is no real precedent for this situation, which makes forecasting based on previous experience look something like trying to read the tea leaves.”

It revised its forecast for the U.S. down 0.3% this year to 1.1%, but it dropped next year’s forecast 1.5% to just 0.7%. Its target for the EU this year is down a tick to 1.7%, with 2002 dropped 0.8% to 1.4%. It also sees deeper recession in Japan, dropping the 2001 call by 0.4% to -0.9%, and dropping 2002 by 1.5% to -1.3%.

He said the possibility of a worse scenario can’t be ruled out. However, this is given a low probability because there are a number of positive underlying factors, including the policy response that has already taken place and the effects of reforms that were introduced in the wake of the Asian crisis.

“Another positive factor is that the decline in oil prices is helping to promote recovery and reduce financing requirements in oil-importing countries. In addition, while there has been a correction in the high-technology sector, there is still major potential for further productivity gains from the use of new technology. So we have reason not to be overly pessimistic. What is needed now is to build confidence, through sober analysis and sound policies, while making sure that we are prepared to deal with a worse outcome if that proves necessary.”

Köhler said the aggressive easing of monetary policy in the U.S. was right, as were cuts by the European Central Bank. “Beyond this, the U.S. now needs to clarify its fiscal stimulus package. The EU should let automatic stabilizers work fully, to avoid unwarranted fiscal contraction. Japan, too, should avoid fiscal contraction in the present circumstances. And Japan should also inject liquidity more forcefully, to counter deflation.”

Köhler also expressed his gratitude to the government of Canada and the city of Ottawa for hosting the IMF meeting, which had to be delayed following September 11. The meeting will focus on the global economic situation in the aftermath of the attacks, and the role of the IMF in combating money laundering and the financing of terrorism.