HONG KONG — Companies in Japan and Germany may have become less gloomy about their prospects in recent months, as surveys showed Monday, but neither they nor businesses elsewhere have much to cheer about as the world economy remains mired in a recession that could see it shrink by about 2.9 percent this year.
Forecasts from the World Bank on Monday highlighted just how painful the recessions will be in various regions, despite mounting signs that the very worst of the downturn may be over.
The bank earlier this month said it expected a deeper global recession, forecasting a 2.9 percent contraction in gross domestic product for this year, rather than 1.7 percent, as it projected as recently as March.
More detailed forecasts released Monday showed that much of this pain will be in high-income areas like the euro zone, the United States and Japan. The bank said that it expected economies in high-income nations to contract a total of 4.2 percent this year.
It expects the U.S. economy to shrink 3 percent and the euro zone 4.5 percent, rather than the 2.4 percent and 2.7 percent it forecast in March. For Japan, the World Bank now projects contraction of as much as 6.8 percent this year — significantly higher than the 5.3 percent it forecast three months ago.
A survey of big Japanese manufacturers released by the government Monday showed sentiment improving in the April-to-June period, to minus 13.2, from minus 66.0 during the previous quarter. And in Germany, the closely watched Ifo business confidence index rose for the third consecutive month in June, to 85.9 from 84.3 in May.
Both readings echoed other encouraging data from around the world in recent weeks that show the pace of decline is at least slowing, but they fall well short of showing actual recovery at this stage, economists caution.
The World Bank’s forecasts Monday echoed this caution: “While the global economy is projected to begin expanding once again in the second half of 2009, the recovery is expected to be much more subdued than might normally be the case,” the bank said in its report. “Unemployment is on the rise, and poverty is set to increase in developing economies, bringing with it a substantial deterioration in conditions for the world’s poor.”
Likewise, the chief economist of the International Monetary Fund, Olivier Blanchard, said Monday that the U.S. economy would see a sustainable recovery only if exports rose substantially, and that this might require an adjustment in the dollar’s exchange rate.
Developing nations will still see growth in 2009, the World Bank said, but this will be slim — 1.2 percent overall, after 8.1 percent in 2007 and 5.9 percent in 2008 — mainly because of the dynamic economies of China and India. Stripping out those two countries, where growth is expected to be 7.2 percent and 5.1 percent in 2009, developing nations will contract 1.6 percent, the bank projects.
Economies in Brazil and Russia — the other two nations in the so-called BRIC quartet of large, and once fast-growing, developing nations — are expected to shrink by 1.1 and 7.5 percent, respectively. The bank had previously expected Brazil to eke out 0.5 percent growth this year, and Russia to shrink by 4.5 percent.
Developing nations have been hit hard by plummeting demand for their exports in the United States and Europe. The recession and financial-market fragility also has caused private capital inflows to developing countries to fall drastically, to $707 billion in 2008, from a peak of $1.2 trillion in 2007, the World Bank said Monday.
Emerging Europe and central Asia have been hit hardest by the crisis, as many countries there had large current account deficits and were especially vulnerable to the abrupt drop-off in capital flows and exports the crisis brought.
GDP in these regions is projected to fall by 4.7 percent in 2009, recovering to grow by about 1.6 percent in 2010.
Many parts of developing Asia suffered mainly because of collapsing exports, but South Asia and the East Asia and Pacific regions are forecast to grow 4.6 percent and 5 percent, respectively.
The World Bank expects global growth to rebound to 2 percent next year and 3.2 percent by 2011. In developing countries, growth is expected to be higher, at 4.4 percent in 2010 and 5.7 percent in 2011.
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