U.S. Recession Threatens World Economy

The possibility that economies around the world may accompany the U.S. economy, which is assumed to have already plunged into a recession, is growing. China which was expected to prop up the world economic growth is also compelled to face a slowdown due to the worst heavy snowfall this winter.

In the G7 meeting held in Tokyo, Japan on February 9, finance ministers and central bankers of the world’s major seven industrialized nations including France, Germany, Italy, Britain, Japan, the United States and Canada expressed concern over the world economy facing the most uncertain circumstances ever owing to various unfavorable factors such as the sluggish U.S. housing market, soaring prices of grains and raw materials and inflation.

The International Monetary Fund laid a gloomy forecast that global growth would stand at 4.1 percent this year, down 0.8 percentage points from the previous year’s 4.9 percent. Meanwhile, Morgan Stanley warned a “double dip” against the U.S. economy throughout this year that the economy would undergo consecutive recessions in the first and second quarters followed by a short-lived recovery in the third quarter and by another recession after that.

Europe is also besieged by signs of recession. The service index across the euro zone has slipped from 53.1 in December 2007 to 50.6 in January 2008 and retail sales last December in the region dropped by 2 percent against the corresponding period of the previous year.

The Bank of England has cut its benchmark rate by a quarter of a percentage point to 5.25 percent last Thursday in apprehension of falling housing prices and worries over the slowing U.S. economy.

The World Bank has lowered its forecast for China’s growth this year to 9.6 percent on February 4 from 10.8 percent laid in September 2007 and economic sentiment in Japan is also shrinking drastically.

[Sun-young Park / KHS]

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