The world economy is “ teetering on the brink” of a severe downturn that is how it is observed by UN in their mid-year economic projection. The global economy is expected to grow only 1.8% in 2008 as against 3.8% in 2007. This downturn is likely to continue with only little respite in 2009 with 2.1% growth, as the UN report said. The developing countries are likely to suffer badly, since they would grow at the rate of 5% this year and 4.8% next year, compared to a growth rate of 7.3% last year i.e 2007. UN economists observe that credit crisis deepening due to US led housing price slump, weakening of dollars, oil price sky rocketing and commodity price following the trail, are causing major imbalance in global economy. Thus it is impeding the growth all around the world.
However, the UN report said the final figure will largely depend on developments in the US. Even the global growth may fall to 0.8% if the US sub-prime mortgage market turmoil has a more serious impact on developing counties and countries in transition. If the monetary and fiscal measure US government has taken in terms of tax relief and lower interest rate --- boost up the consumer spending, then things may change for better. The global growth may slow down to 2.8% this year and 2.9% next year.
The UN department of economic and social affairs forecast that US economic growth will decline from 2.2% in 2007 to -0.2% this year. For other developed countries, UN observe that Japan`s economic growth will decline from 2.1% in 2007 to 0.9% in 2008 and that of Western Europe will drop from 2.6% last year to 1.1% this year.
What is alarming, despite of slowdown in growth; global inflation is all set to rise to 3.7% this year. The growth of global trade is likely to slow down from 7.2% last year to 4.7% this year. This is again largely due weak US demand. So, the situation for we all appears to be gloomy for next couple of years.