The UN forecast yesterday that the world economy would bounce back next year with a global growth rate of 2.4 percent, but it warned that the recovery would be fragile.
In a preview of its annual economic forecast, the UN credited the massive fiscal stimulus measures by governments worldwide since late last year for the expected rebound. It recommended that these stimulus measures continue — at least until there are clearer signals of a more robust recovery, an increase in employment rates and growing private sector demand.
The UN report said an increasing number of economies showed positive growth in the second quarter of this year, with the recovery continuing in the third quarter. It pointed to increased industrial production, a rebound in global equity markets and a rise in international trade.
“This is an important turnaround after the free fall in world trade, industrial production, asset prices and global credit availability, which threatened to push the global economy into the abyss of a new Great Depression in early 2009,” the UN report said.
But the report, The World Economic Situation and Prospects 2010, warned that “the recovery is uneven and conditions for sustained growth remain fragile.”
The report said the failure to address two risks could cause the global economy to enter into a double-dip recession.
The first is the risk of prematurely abandoning financial stimulus measures and the second is the risk of a widening US deficit and mounting external debt which could cause “a hard landing” for the US dollar and set off a new wave of financial instability, it said.
While the global economy has grown in the second and third quarters of this year, the report said that “because of the steep downturn in the beginning of the year, world gross product is estimated to fall by 2.2 percent for the year.”
It said economic growth next year would be strongest in developing countries, especially in Asia.
It predicts growth in developing nations will increase from 1.9 percent this year to 5.3 percent next year, with China’s economy expected to grow 8.8 percent and India’s by 6.5 percent next year — both below their pre-crisis pace.
Russia is expected to lead the turnaround among economies in transition, with 1.5 percent growth next year following a severe drop of 7 percent this year, the report said.
In the industrialized world, the US economy is forecast to grow 2.1 percent next year after an estimated decline of 2.5 percent this year, the UN said.
Recovery in the EU and Japan will be much weaker — below 1 percent — next year, it said.
The world’s poorest countries will see their robust growth before the financial meltdown slows significantly, the UN said.
The report said 107 of the 160 nations for which data are available registered a decline in per capita income this year, including most developed countries and about 60 developing countries.
It predicted that only 10 developing countries would see their per capita income decline next year.
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