The global financial crisis has been compounded by an exceptionally sharp drop in world trade, and we are now facing the most widespread global recession in over sixty years. World GDP is expected to record an annual decline this year for the first time since 1946. As the economic crisis has developed, policymakers have stepped in across the globe to help stabilise the world economy. In the absence of fiscal and monetary easing initiated since 2008, world output would have been expected to decline by 1.7 per cent this year, compared to our current forecast decline of 0.5 per cent. However, while policy actions in the banking sector were sufficient to stabilise what appeared to be the imminent collapse of the global financial system last October, there is little concrete evidence that policy initiatives have successfully started to ease lending conditions. The key risks to our forecast hinge on the speed with which financing conditions normalise, the speed with which world trade reverts to equilibrium and the path of inventories.