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blade
Joined: 30 Jun 2007
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 Posted: Tue Dec 09, 2008 5:21 pm Post subject: Yet another bad forcast the world's economy:( |
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WASHINGTON � The world economy is on the brink of a rare global recession, the World Bank said in a forecast released Tuesday, with world trade projected to fall next year for the first time since 1982 and capital flows to developing countries forecast to plunge 50 percent.
The projections are among the most dire in a litany of recent gloomy prognostications for the world economy, and officials at the World Bank warned that if they proved accurate, the downturn could throw many developing countries into crisis and keep tens of millions of people in poverty.
Even more troubling, several economists said, there is no obvious locomotive to propel a recovery.
American consumers are unlikely to return to their old spending habits, even after the United States climbs out of its current financial crisis. With growth in China slowing sharply, consumers there are not about to pick up the slack from the Americans. The collapse in oil prices � a side-effect of the crisis � has knocked the wind out of consumers in oil-exporting countries.
�The financial crisis is likely to result in the most serious recession since the Great Depression,� said Justin Lin, the chief economist of the World Bank, summarizing the projections.
The bank forecasts the global economy will eke out growth of 0.9 percent in 2009, down from 2.5 percent this year and 4 percent in 2006. That is the slowest pace since 1982, when global growth was 0.3 percent. Developing countries will grow an average of 4.5 percent next year � a pace that economists said constituted a recession, given the need of these countries to grow rapidly to generate enough jobs for their swelling populations.
�You don�t need negative growth in developing countries to have a situation that feels like recession,� said Hans Timmer, who directs the bank�s international economic analyses and projections. He predicted rising joblessness and shuttered factories in many developing countries.
The volume of world trade, which grew 9.8 percent in 2006 and an estimated 6.2 percent this year, will contract by 2.1 percent in 2009, the report said. That drop would be deeper than the last major contraction in trade: 1.9 percent in 1975.
Net private flows of capital to developing countries are projected to decline to $530 billion in 2009, from $1 trillion in 2007.
The loss of that capital will sharply constrict investment in emerging-market economies, the report said, with annual investment growth slowing to 3.4 percent in 2009 from 13 percent in 2007.
Several countries are also being hurt by the decline in the prices of oil and other commodities � a phenomenon the World Bank characterizes as the end of a five-year commodities boom � though the decline in food and fuel costs has relieved the pressure on people in other countries.
The sudden drop in capital flows poses a particular danger to oil exporters, some of whom have run up heavy debts.
�They�ll have to roll over that debt, one way or the other,� said Simon Johnson, a former chief economist of the International Monetary Fund. �That�s going to put a huge squeeze on these countries.�
Mr. Johnson said the calmer atmosphere in foreign markets belied the gravity of the situation. Spreads on credit default swaps � a common yardstick for whether a country�s government is in danger of default � continue to signal potential trouble for Ireland, Italy, and Greece.
The authorities in Greece are battling violent street protests in Athens and its suburbs, fueled in part by the deteriorating economy.
Reflecting what is by now conventional wisdom, the World Bank recommended that countries undertake large fiscal stimulus programs to cushion the downturn. The bank itself has committed up to $100 billion in aid to developing countries over three years.
If there is a silver lining amid the gloom, it is the relief that lower food and fuel prices mean for poorer countries. While the prices of almost all commodities have fallen sharply since July, they remain higher than in the 1990s, which the bank says should prevent future supply shortages.
As the World Bank�s experts struggled to find a historical analog for the slump, they said it had more in common with the Depression of the 1930s than with the severe recessions of the 1970s or 1980s.
�It is not just a supply shock,� Mr. Lin said. �It is not just a drop in demand; it is a lack of availability of credit.�
Deutsche Bank, in a forecast issued this week, was even more pessimistic. It said global growth would drop to 0.2 percent in 2009, with the United States, Europe, and Japan in recessions of roughly equal severity.
China, which grew 11.9 percent in 2007, will slow to 7 percent this year, the bank projects, and 6.6 percent in 2010, when the rest of the world is slowly recovering. �It�s not going to be the spark that reignites global demand,� said Thomas Mayer, the chief European economist for Deutsche Bank. �We�re almost in an air pocket, where we don�t have a new global driver of growth.�
http://www.nytimes.com/2008/12/10/business/worldbusiness/10global.html?hp |
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fiveeagles
Joined: 19 May 2005
Location: Vancouver
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| Posted: Wed Dec 10, 2008 10:36 pm Post subject: |
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The average for US recessions is 16 months...we are already at 12 months.
4 to 9 more months of this and we will be moving past this. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Wed Dec 10, 2008 10:43 pm Post subject: |
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Well, this recession is "severe", apparently. I strongly believe we are in the dead middle right now. This is as bad as it is going to get, but the duration is what will kill us. Middle 2010 is when we can start to think of positive growth again.
But the government could screw it up even worse. |
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sharkey
Joined: 12 Oct 2008
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| Posted: Wed Dec 10, 2008 11:54 pm Post subject: |
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| mises wrote: |
Well, this recession is "severe", apparently. I strongly believe we are in the dead middle right now. This is as bad as it is going to get, but the duration is what will kill us. Middle 2010 is when we can start to think of positive growth again.
But the government could screw it up even worse. |
how do you justify your thinking? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Dec 11, 2008 6:53 am Post subject: |
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| My badassedness. |
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Hater Depot
Joined: 29 Mar 2005
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| Posted: Thu Dec 11, 2008 10:20 am Post subject: |
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| fiveeagles wrote: |
The average for US recessions is 16 months...we are already at 12 months.
4 to 9 more months of this and we will be moving past this. |
The average length of a US recession post-WWII is more like 10 months. 16 months is the length of the two longest, one of which was just a few years ago post-9/11.
I believe we have not necessarily seen the worst and there is a severe danger of a new depression. Whether the major economies of the world act wisely or stupidly will play a very significant part in how this all turns out. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Dec 11, 2008 10:26 am Post subject: |
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Recession/depression aren't clearly defined. The risk is sustained high unemployment.
There is an enormous amount of bad "investments" in the system. They need to dissolve before growth can begin again. The forecasters who I trust and who have been extremely accurate thus far are looking to middle 2010 most likely.
I'm taking this opportunity to beef up my CV while working. Recessions are horrible on people who have oodles of debt. If you are young and relatively debt free, this is something of an opportunity. |
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sojourner1
Joined: 17 Apr 2007
Location: Where meggi swim and 2 wheeled tractors go sput put chug alugg pug pug
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| Posted: Thu Dec 11, 2008 2:52 pm Post subject: |
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| Hard to say what's going on, but we do know one thing. This is not your ordinary recession as there are many almost unprecedented dysfunctionalism going on which centers around the over use of and bad use of debt on both a national and consumer level. The future doesn't look very rosy for quite some time to come. Don't expect as much of a retirement the baby boomers and those in line before them had. |
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blade
Joined: 30 Jun 2007
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| Posted: Thu Dec 11, 2008 3:58 pm Post subject: |
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| mises wrote: |
| Recessions are horrible on people who have oodles of debt. If you are young and relatively debt free, this is something of an opportunity. |
An opportunity to people who have money and who can afford to invest for the long term but other than that I don't think so. |
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