The world economy is heading for zero growth in 2009 as a deepening recession in rich countries slows the sale of consumer goods and raw materials from developing nations, the United Nations said Tuesday.
The global body's trade and development office, UNCTAD, said it has downgraded its forecast for this year after a worse-than-expected economic performance during the fourth quarter of 2008.
"For the world as a whole the outcome could be zero or even slightly below zero (growth)," said Heiner Flassbeck, a senior official at the Geneva-based office.
"This is not an overly pessimistic view on the world economy," he added.
The U.S. economy could shrink by as much as 1.9 percent, while Euro-zone economies will contract by up to 1.5 percent, according to a 160-page report prepared by UNCTAD.
Japan is expected to see negative growth of between 0.3 and 0.6 percent, while Mexico appears likely to tip into the red zone as well, with a contraction of 1.2 percent being the worst-case scenario.
Major developing countries also will suffer, with China's growth predicted to slow to 7 percent and India's to around 6 percent. The world's poorest economies will grow by less than 5 percent.
"What we see is the unwinding of a number of speculative waves," Flassbeck said, noting that the U.S. subprime mortgage crisis wasn't the only reason for the current economic downturn.
The U.N. is particularly concerned about Eastern European countries such as Poland and Hungary, where consumers are saddled with huge foreign currency loans. Debtors in those countries are finding it hard to repay mortgages and borrowings made in Swiss francs now that the currency has risen compared to their own.
Flassbeck said countries should follow the lead of the United States by putting together massive economic stimulus packages.
Governments in Japan, Germany and China in particular have room to maneuver and should do so sooner rather than later, he said.
"The reduction of debt in the private sector has to be compensated by a huge amount of public debt, at least temporarily, if we want to stabilize the global economy."
Flassbeck warned that the biggest threat came from a 1930s-style deflation, when wage cuts of 10 to 15 percent caused a dramatic fall in consumer spending and brought the world economy to a virtual standstill.
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