The Economist has revised its forecast for global GDP growth for 2009. In December it predicted a contraction of 0.4% which it has revised to a minus 0.9%. They forecast that no industrialized country is likely to be spared the pain.

They say that their forecast would be even darker were it not for the fiscal stimulus being undertaken by various governments.

The picture would be even gloomier if not for the aggressive response by policymakers. Responses in some countries, in fact, have been so aggressive that policymakers are rapidly exhausting conventional tools and are having to experiment with unorthodox measures. Benchmark interest rates in the US, Japan and the UK will be held at 0-0.5% in 2009; the low rates will be complemented by substantial monetary stimulus through unconventional instruments. Despite some tightening, rates will remain historically low in 2010-11. The European Central Bank (ECB, which cut its key rate by 50 basis points to 2% on January 15th) is slightly more concerned with guarding against inflation. But the ECB will still bring its rate to just 1% in the coming months. Fiscal policy will be loosened aggressively in a number of countries, leaving the US and the UK in particular with large budget deficits. US lawmakers are currently discussing a proposed US$825bn stimulus programme.

All well and good, but it does sort of emphasize the importance of governments getting this whole fiscal stimulus thing right. There is an awful lot riding on that.