World economy to see severe test in '09: poll
Sunday, 19 October 2008
London, Oct 18 (Reuters): The global economy will likely shudder to recessionary levels in 2009 as developed nations' woes damage emerging countries' economic prospects, a Reuters poll showed on Friday.
Global growth is expected to slow sharply this year and with the world's main industrialised countries either in or close to recession already, developed economies are likely to take away rather than add anything to global activity next year.
A Reuters poll of 41 economists, published after a survey of G7 countries on Thursday showed most were in recession, found global growth slowing to 3.7 percent in 2008, and then to 3.0 percent in 2009, from around five percent last year.
While there is no official measure of how low global growth would have to qualify as a recession, economists agree that a rate below 3.0 percent is recession territory.
"Three percent growth is consistent with a global recession and the number could be even worse than this given how bad things look in the US and in Europe," said Ken Wattret, chief euro zone economist at BNP Paribas.
He said fragile consumer confidence, stock market turmoil and troubled money markets would have major spill-over effects for developing countries.
And even the world's new powerhouse, China, won't be able to to stop the rot, according to analysts.
"Even if China still manages to grow 7-8 percent next year, instead of over 10 percent, that is still a pronounced adjustment and the impact is huge," added Wattret.
Forecasts for global growth are roughly in line with the International Monetary Fund's own assessment. It forecasts growth of 3.9 percent in 2008 and 3.0 percent in 2009, though it has not defined this as a recession.
Economists' predictions also vary considerably in a time of unprecedented market upheaval, ranging from growth rates of just 1.5 percent to a relatively strong 4.0 percent next year.
"We expect to see a significant slowing of global growth while the Western economies work through some of the excesses from leverage, the housing market and household sectors built up over the last decade," said Matthew Sharratt at Bank of America.
He said that would mean a couple of years of moderate to stagnant growth.
The only bright spot is the fall in commodity prices, which in time could provide some relief to consumers, said economists.
Global growth is expected to slow sharply this year and with the world's main industrialised countries either in or close to recession already, developed economies are likely to take away rather than add anything to global activity next year.
A Reuters poll of 41 economists, published after a survey of G7 countries on Thursday showed most were in recession, found global growth slowing to 3.7 percent in 2008, and then to 3.0 percent in 2009, from around five percent last year.
While there is no official measure of how low global growth would have to qualify as a recession, economists agree that a rate below 3.0 percent is recession territory.
"Three percent growth is consistent with a global recession and the number could be even worse than this given how bad things look in the US and in Europe," said Ken Wattret, chief euro zone economist at BNP Paribas.
He said fragile consumer confidence, stock market turmoil and troubled money markets would have major spill-over effects for developing countries.
And even the world's new powerhouse, China, won't be able to to stop the rot, according to analysts.
"Even if China still manages to grow 7-8 percent next year, instead of over 10 percent, that is still a pronounced adjustment and the impact is huge," added Wattret.
Forecasts for global growth are roughly in line with the International Monetary Fund's own assessment. It forecasts growth of 3.9 percent in 2008 and 3.0 percent in 2009, though it has not defined this as a recession.
Economists' predictions also vary considerably in a time of unprecedented market upheaval, ranging from growth rates of just 1.5 percent to a relatively strong 4.0 percent next year.
"We expect to see a significant slowing of global growth while the Western economies work through some of the excesses from leverage, the housing market and household sectors built up over the last decade," said Matthew Sharratt at Bank of America.
He said that would mean a couple of years of moderate to stagnant growth.
The only bright spot is the fall in commodity prices, which in time could provide some relief to consumers, said economists.