The International Monetary Fund warned that the financial crisis is having far-reaching effect on emerging economies, particularly in Eastern Europe.

IMF newly issued report said that globalization had strengthened the transmission mechanisms which would deepen the crisis, especially due to the strong presence of Western European banks in Eastern Europe. Thus, banks' liquidity problems are being felt in these countries.

There may be a decline in capital flows to these countries, and it could be a long time before such flows return to developing and emerging market countries, the IMF said.

The International Monetary Fund foresees that the current global recession will be "unusually long and severe, and the recovery sluggish".

Recessions linked to financial crises, such as the current one, tend to last much longer, the report said. The recoveries following these slowdowns are then often held back by weak private demand, as households try to save more.

The typical recession lasts for a year, with a recovery lasting five years. A synchronized slowdown, where many of the world's economies are in recession at the same time, though, lasts one and a half times longer than a typical recession, the report said.

Detailed forecasts for individual countries are set to be released next week, ahead of the IMF's spring meeting in Washington.

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