THE International Monetary Fund said the world?s advanced economies are already in a ?depression? and the financial crisis may deepen unless the banking system is fixed.

?The worst cannot be ruled out,? the Funds managing director, Dominique Strauss-Kahn, said in Kuala Lumpur, where he was attending a gathering of central bankers from Southeast Asia during the weekend.

?There?s a lot of downside risk.?

The Fund has cut its world-growth estimate for this year to 0.5 percent, the weakest pace since World War II. Stimulus packages alone would not succeed in dragging the global economy out of recession unless confidence was restored in the banking system, Strauss-Kahn said.

?All this will work if, and only if, the different countries are likely to do what they have to do in terms of restructuring the banking sector,? he said. ?And today it?s not done.?

The US economy has lost 3.57 million jobs since a recession started in December 2007, its biggest employment slump of any economic contraction in the post-war period as companies from Macy?s Inc. to Caterpillar Inc. cut costs. The UK economy will shrink this year by the most since 1946, the Fund forecasts.

?There is hope that the fiscal and monetary stimulus measures being implemented around the world can help turn things around,? said David Cohen, Singapore-based director of Asian economic forecasting at Action Economics.

?But there is still the risk it can be short-circuited by further financial turmoil.?

The US Senate is due to vote this week on an economic stimulus package totaling at least $780 billion that President Barack Obama said was needed to prevent the economy from sinking into a deeper recession. Asian nations have pledged more than $685 billion on their own spending programs. Bloomberg