By Max Clarke

Japan’s economy is forecast to contract in 2011 in the wake of the devastation wrought on the country following March’s earthquake and tsunami, the IMF have said.

The earthquake has caused lasting damage to the country’s electricity supply and caused severe shortages in the country’s industry, as well as killing some 24,000 people. While recovery is well underway, and industry has adapted well to the challenges, the damage to the country is so severe that the economy will continue to contract.

“The Japanese people have shown tremendous resilience in dealing with this terrible tragedy and now in tackling the formidable challenges of reconstruction,” said John Lipsky, the IMF’s Acting Managing Director, on a trip to Tokyo. He announced Japan would hold the 2012 IMF-World Bank Annual Meetings.

Contraction for the world’s third biggest economy will, however, be shortlived as the IMF anticipate modest growth beginning next year. Growth will be muted for some time as reconstruction costs alone are expected to be as high as 4%. Of the GDP.

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