World Bank warns of wobble ahead for global economy

The global economy is on unsteady legs, the World Bank warned on Friday, saying that 2010 would be “a highly uncertain economic year” as other signals took the gloss off talk of a quick recovery.

The warning came as stock markets tumbled around the world and the United States, the world’s biggest economy, prepared to unveil monthly unemployment figures expected to show the jobless rate rising to 9,9%.

The International Monetary Fund (IMF) raised its economic growth forecasts for next year for most major advanced and emerging economies, on Thursday.

But experts warn that unemployment will rise, that recovery will be slow at best, and that there could even be a return to recession.

“We’ve broken the fall of the financial crisis but it’s
certainly too early to declare success,” World Bank president Robert Zoellick said in Istanbul in the runup to the annual meetings of the IMF and the World Bank.

“2009 will continue to be a difficult year and 2010… a highly uncertain economic year,” he said, citing in particular the risk of inflation in Asian economies and the social effects of rising unemployment.

“We expect that unemployment will continue to go up and it’ll be slow in coming down ... When you have large-scale unemployment those at the bottom are hurt the most and have the least cushion,” he added.

IMF managing director Dominique Strauss-Kahn issued a similar warning about mounting job losses, telling reporters in Istanbul: “I’m still very much concerned about unemployment ... It casts a long shadow over the recovery.”

In Europe, figures released on Thursday showed the unemployment rate in the 16-nation eurozone hit 9,6% in August.

Japan, meanwhile, said on Friday that its jobless rate fell to 5,5% in August—the first improvement in seven months.

Japanese shares closed down 2,47%, however, after a plunge on Wall Street, where the Dow Jones Industrial Average lost 2,09% on Thursday amid fears about a possible setback in recovery for US manufacturing.

Jitters on the stock markets are mirroring broader concerns among experts about the stability and pace of the recovery.

Brian Coulton, head of global economics at international credit ratings agency Fitch, said he expected “the pace of expansion to remain weak by the standards of previous recoveries and fragile to shocks.”

Fitch said the speed of global economic growth “may ease somewhat in mid-2010 as the boost from the inventory cycle and normalisation in world trade flows fades” but added that growth would remain positive.

Some economists have warned about the possibility of a “double-dip recession,” with economic contraction following the current recovery.

Strauss-Kahn said on Thursday that a return to recession could be a risk if major governments start winding up economic stimulus plans too early.—Sapa-AFP

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