"Even if these nascent trends continue, stabilisation is far from recovery," the authors of the report wrote.

"Global financial stress remains exceptionally high and demand extremely low," the report noted, adding that "prospects for an imminent rebound of economic activity in the region are weak".

The financial crisis that began in the US sub-prime mortgage sector in 2007 has mushroomed into the worst global downturn since the Second World War, dragging Asia down with it.

Spillovers

The IMF said the slowdown has hit Asia with unexpected speed and force [Reuters]
"The spillovers from the global crisis have impacted Asia with unexpected speed and force,'' the fund said.

Many Asian economies, which rely heavily on export manufacturing, have been hit hard by a sudden and dramatic plunge in demand for their products from the West.

According to the IMF outlook China, the world's third-largest economy, will grow the most of the major Asian countries over the next two years, expanding 6.5 percent in 2009 and 7.5 percent in 2010.

While such growth levels remain the envoy of many countries, that is still well short of the eight per cent growth the Chinese government has said it needs to provide jobs for an expanding workforce and ensure social stability.

Elsewhere in Asia, the IMF report says it expects Singapore's economy, which relies heavily on trade, finance and tourism, to shrink the most, contracting 10 per cent this year and 0.1 per cent next year.

Stimulus

"Even if these nascent trends continue, stabilisation is far from recovery"

IMF

In Japan, where a steep drop in exports has badly dented consumer confidence, the fund said it expects the region's biggest economy to shrink 6.2 per cent this year and grow by just 0.5 per cent in 2010.

To help encourage recovery and spur domestic demand the Washington-based IMF called on Asian governments to extend already announced fiscal stimulus packages into next year.

Across the region governments have pledged more than $800bn in spending packages, infrastructure projects, tax cuts and cash handouts with China alone having pledged to spend $585bn.

But the IMF said that while packages already approved will help "limit the damage" to Asian economies "they will not be enough to generate sustained growth in the region."

The fund also called on Asian banks and central banks to consider cuts interest rates, purchases of corporate bonds and providing guarantees to bank loans in a bid to spur lending and investment.