US to avoid recession?

But World Bank says US economy facing ‘high degrees of uncertainty’

SINGAPORE: World Bank head Robert Zoellick said yesterday he was confident the United States would not sink into another recession, despite widespread fears over the state of the world's biggest economy.

Zoellick's comments came just days after official figures showed no jobs were created in the United States in August, the worst result since September last year, compounding an already downbeat outlook.

“I don't believe (the) US and the world will go into a double dip,” he told a news conference in Singapore, in response to a question on the subject.

But he said there were “high degrees of uncertainty” facing the US as well as the global economy.

“And I think that in the case of the US economy that we're likely to see an ongoing slow growth, ongoing high unemployment,” said Zoellick.
Jobs wanted: Two men visiting a job fair for military veterans in Culver City, California. US unemployment is stuck at 9.1%, the latest figures show. — AFP

Global markets have tumbled since Friday after a raft of global manufacturing figures indicated a virtual halt in activity, while Friday's US payrolls data - which also showed unemployment stuck at 9.1% - prompted further selling.

Adding to fears of a “double dip” - in which a short-lived recovery from one recession is followed by another downturn - are renewed worries over eurozone sovereign debt, particularly in Italy and Greece.

Economists and leaders are worried a default by one of the peripheral nations of the eurozone could spread to other bigger economies and spark another global financial crisis.

“The reason that I and others, (including IMF head) Christine Lagarde, have been highlighting events in the eurozone is that they can have ripple effects all around the world, not only in terms of financial and capital markets but also in terms of confidence, whether be it consumers or businesses,” said Zoellick.

Moves by the European Central Bank (ECB) to buy bonds would give the eurozone some breathing space but ultimately, European leaders have to decide on the long-term moves needed to get the affected economies back on track, he said.

“We're reaching a key decision point for European leaders.”

The ECB has bought billions of dollars in eurozone government bonds since it first began such operations early last year as part of efforts to ease debt strains in the eurozone.

Lagarde, the managing director of the International Monetary Fund, said in a recent speech to central bankers in the United States last month that “risks to the global economy are rising, but there remains a path to recovery.” “The policy options are narrower than before but there is a way through,” she had said. “I am confident that with the right actions, strong, sustainable, and balanced growth can and will be restored.” - AFP