Dec. 4 (Bloomberg) -- The International Monetary Fund’s chief economist said fiscal stimulus equivalent to more than 2 percent of global gross domestic product may be necessary to reduce the possibility of a deep recession.

Should the economic slump prove “even worse than we currently forecast, the fiscal expansion would have to be even larger than we currently recommend,” Olivier Blanchard, the IMF’s top economist, said in an article published by the lender. “What is essential at this juncture is to eliminate the risk of a full-fledged depression.”

The IMF predicted last month that the economies of the U.S., Japan and euro region will shrink in 2009. Government taxation and spending policies need to “play the central role” in reviving growth, Blanchard said.

The IMF recommended a coordinated global fiscal expansion equivalent to 2 percent of world GDP at its annual meeting in October.

Fiscal stimulus would result in “higher debt in the long run, often by significant amounts,” Blanchard said.

Still, the U.S. will probably recover much of its investment in troubled assets purchased from banks, he said. “The value of the assets they will have acquired may be substantial.”

Governments that now own large shares in their banking systems should aim to “maintain a level playing field with privately owned institutions” and “steadily allow the return of the financial sector to private hands,” he said.

To contact the reporters on this story: Christopher Swann in Washington at cswann1@bloomberg.net;

Last Updated: December 4, 2008 15:35 EST