UNITED NATIONS | The United Nations forecast Wednesday that the world economy will bounce back in 2010 with a global growth rate of 2.4 percent, but it warned that the recovery will be fragile.
In a preview of its annual economic forecast which will be released next month, the U.N. credited the massive fiscal stimulus measures by governments worldwide since late 2008 for the expected rebound. It recommended that these stimulus measures continue - at least until there are clearer signals of a more robust recovery in terms of increasing consumption, more private investment and rising employment rates around the world.
“Before that, it would be risky and even could be self-defeating to withdraw stimulus,” said Rob Vos, director of the Economic Analysis Division in the U.N.’s Department of Economic and Social Affairs.
The U.N. report said an increasing number of economies showed positive growth in the second quarter of 2009, 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 U.N. 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 U.S. deficit and mounting external debt which could cause “a hard landing” for the U.S. dollar and set off a new wave of financial instability, it said.
The U.S. Federal Reserve reported Wednesday that the economic recovery gained traction in late fall as shoppers spent a bit more and factories bumped up production. That assessment marked its most upbeat view since the economy tumbled into recession two years ago.
The Fed’s new snapshot of business barometers nationwide found that conditions have generally improved since the last report in late October.
Eight of the Fed’s 12 regions surveyed reported some pickup in activity or improved conditions: Boston, New York, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.
The four other regions - Philadelphia, Cleveland, Richmond and Atlanta - described conditions as little changed or mixed.