2010 would be a highly uncertain yr: World Bank

Last Updated: Saturday, October 3, 2009 - 00:07

Istanbul: The World Bank on Friday warned the global economy was on unsteady legs, 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, said job losses had accelerated to 263,000 in September and the unemployment rate rose to 9.8 percent.

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

But experts warn that unemployment will continue to 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 run-up to the annual meetings of the IMF and the World Bank next week.

"2009 will continue to be a difficult year and 2010, when much of the stimulus action will run out, remains a highly uncertain economic year," he said, citing in particular the risk of inflation in Asian economies.

"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 warned unemployment would continue to rise for around a year, saying: "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 percent in August.

Japan meanwhile said on Friday that its jobless rate fell to 5.5 percent in August -- the first improvement in seven months.

Japanese shares closed down 2.47 percent however after a plunge on Wall Street, where the Dow Jones Industrial Average lost 2.09 percent on Thursday amid fears about a possible setback in recovery for US manufacturing.

Stocks were sharply down in Europe and the United States on Friday.

Reacting to the jobs data on Friday, US Vice President Joe Biden said the figures were "tough news" but expressed confidence the economy would recover.

"Today`s bad news does not change my confidence in the fact that we are going to recover -- we will be producing jobs," Biden told reporters.

The figures highlight broader concerns among experts about the recovery.

"This confirms that this is going to be a frustratingly slow recovery and it`s not going to make a lot of people happy for a long time," said Robert MacIntosh, economist at US investment company Eaton Vance.

In comments about the global economy, Brian Coulton from 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.

Bureau Report

First Published: Saturday, October 3, 2009 - 00:07

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