Posted by Gilmour Poincaree on December 12, 2008

Thursday, December 11, 2008



WASHINGTON, D.C.: The World Bank offered a grim 2009 outlook Tuesday of just 0.9 percent growth for the global economy, while a recession was declared in Canada and a rescue for US automakers hung in the balance.

In its “Global Economic Prospects” report, the World Bank sharply cut its growth forecast and predicted world trade volume would fall 2.1 percent as a worldwide credit crisis hits rich and poor nations alike.

Developing countries’ economies would likely expand at a reduced annual pace of 4.5 percent while wealthier, developed economies are expected to contract 0.1 percent, the multilateral development lender said.

“The global economy is at a crossroads, transitioning from a sustained period of very strong developing country-led growth to one of substantial uncertainty as a financial crisis rooted in high-income countries has shaken financial markets worldwide,” said World Bank chief economist Justin Lin.

In Canada, the central bank lowered its key interest rate Tuesday by 0.75 point to 1.50 percent and said the Canadian economy had slid into a recession amid the global financial crisis.

“The outlook for the world economy has deteriorated significantly and the global recession will be broader and deeper than previously anticipated,” the bank said in a statement.

In Washington, the White House demanded that Detroit automakers prove their “long-term viability” in return for a $15-billion rescue bailout but said a deal with Congress was in sight.

President George W. Bush’s administration is making “good progress” in its talks with congressional leaders over legislation to shore up General Motors, Ford and Chrysler, White House spokeswoman Dana Perino told reporters.

“We are still working through a number of issues, some of them just small and technical, and other ones a little bit more meaty in scope, but, all in all, making sure we’re headed in the right direction,” she said.

In Geneva, the International Air Transport Association forecast that airlines would likely lose $2.5 billion (1.9 billion euros) in 2009 due to the economic crisis.

“The outlook is bleak,” said Giovanni Bisignani, the association’s director general and chief executive.

“We face the worst revenue environment in 50 years.”

In Britain meanwhile, data showed manufacturing output sank 1.4 percent in October from September, the eighth monthly drop in a row, and was down 4.9 percent on a 12-month basis, the Office for National Statistics said.

The monthly fall was the largest decline since March 2005 and marks the country’s longest consecutive contraction in manufacturing output since 1980.

In Japan, Sony said it would cut investment in its electronics business by 30 percent, cut 10 percent of its manufacturing sites and exit unprofitable businesses to cope with the downturn.

The announcement came just hours after Tokyo said the Japanese economy shrank 0.5 percent in the third quarter—1.8 percent on an annualized basis—even worse than initially estimated.

“The data suggests that the economy is contracting faster than previously thought, and the depth of the recession will be more severe,” said Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong.



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