The global economy is set to rebound in 2010 but the risk of a “double-dip” recession is clear and present, according to the latest World Economic Situation and Prospects (WESP) Report.
The report, released by DESA’s Development Policy and Analysis Division in January, found that the global economy will bounce back this year with a predicted 2.4 per cent growth rate.
Director of the Development Policy and Analysis Division Rob Vos said that this was an improvement on the 2.2 per cent contraction that the global economy experienced in 2009.
“[In] early 2009, the world economy was in a free fall and we were at the edge of falling into another Great Depression. Unlike in the 1930s, however, this time policy makers pushed for unprecedented strong policy responses through large scale financial bailouts and massive fiscal response measures,” Mr. Vos said.
However, he said that the recovery remains “fragile”.
“Financial sectors worldwide still face many weaknesses, credit supplies remain tight and lending conditions are still costly for many borrowers despite the low interest-rate policies,” he said.
“We should not be too optimistic about the strength of the recovery and we can’t be as long as unemployment rates are up and consumers and productive investments are not driving the recovery.”
The report found that growth levels among countries were far from consistent, with China and India’s economies expected to grow at 8.8 and 6.5 per cent respectively while the United States is expected to grow by 2.1 per cent.
Recovery in both the European Union and Japan was projected to be weaker still, reaching GDP growth of no more than 0.6 and 0.9 per cent respectively.
Chief of the Global Economic Monitoring Unit at the Development Policy and Analysis Division Pingfan Hong said that to prevent a “double dip recession”, governments should “avoid a premature withdrawal of the policy stimuli, and in some cases, they should increase stimuli further”.
“A premature exit of policy support can abort the recovery and without a solid growth recovery, the fiscal position can only become even worse.”
He said that “international policy cooperation” was essential to sustain the global economic recovery.