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The assumption of a 5% drop in real GDP at factor cost in high-income countries is based on an inspection of pre-crisis OECD growth trends and recent macroeconomic forecasts for 2009 by the IMF, the World Bank and the OECD: The five year average real annual OECD GDP growth rate over the period 2004-08 has been on the order of 2.7%. This rate maybe considered as the medium-run trend growth rate that would have prevailed through 2009 in the absence of the financial crisis shock. The end of 2008 forecasts by the IMF World Bank and OECD 6 predict an OECD-wide GDP growth rate on the order of -0.3% for 2009 - that is, OECD GDP in 2009 is predicted to be 3% below trend GDP. However, more recent macroeconomic forecasts including the end-of-January IMF World Economic Outlook update are substantially more pessimistic – hence we assume an OECD- wide GDP drop of 5% relative to a no global-financial crisis benchmark.
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