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."
Assistant Secretary-General Jomo Sundaram told a news conference launching the report that while "there have been important signs of some recovery ... there are also very grave concerns about the possibility that this recovery will be short-lived and will not be sustained."
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.
Sundaram said the U.N. believes that governments should ignore concerns about growing fiscal deficits and possible inflation and continue stimulus efforts until the economic recovery is assured.
He said it was also extremely important that earlier U.N. concerns are addressed quickly including "the inadequacy of international coordination of the recovery efforts" and "the inadequacy" of efforts to reform the economic system to prevent another global financial meltdown. Reform efforts so far "have been rather limited," he said.
While the global economy has grown in the second and third quarters of 2009, the report said "because of the steep downturn in the beginning of the year, world gross product is estimated to fall by 2.2 percent for the year (2009)."
According to the report, economic growth next year will be strongest in developing countries, especially in Asia.
It predicts growth in developing nations will increase from 1.9 percent in 2009 to 5.3 percent in 2010, with China's economy expected to grow by 8.8 percent in 2010 and India's by 6.5 percent, both below their pre-crisis pace.
Russia is expected to lead the turnaround among economies in transition, with 1.5 percent growth in 2010 following a severe drop of 7 percent this year, the report said.
In the industrialized world, the U.S. economy is forecast to grow by 2.1 percent in 2010 following an estimated decline of 2.5 percent in 2009, the U.N. said.
Recovery in Japan and the 16 European Union countries that use the euro currency will be much weaker — below 1 percent — next year, it said.
The world's poorest countries will see their robust growth before the financial meltdown slow significantly, the U.N. said.
The report said 107 of the 160 nations for which data are available registered a decline in per capita income this year, including most developed countries and about 60 developing countries.
In 2010, the U.N. predicted that only 10 developing countries will see their per capita income decline. But at the same time, only 21 are expected to achieve economic growth rates of 3 percent or more, the minimum needed to ensure substantial poverty reduction, it said.
The report is produced at the beginning of every year by the U.N. Department of Economic and Social Affairs, the U.N. Conference on Trade and Development, and the five U.N. regional commissions.