A year of falling global output lies ahead

This year promises to be the worst for the UK economy since the 1980s. For the world economy, the downturn is set to be the worst since 1945, partly because the advanced economies as a group are entering recession en masse.

This year promises to be the worst for the UK economy since the 1980s. For the world economy, the downturn is set to be the worst since 1945, partly because the advanced economies as a group are entering recession en masse. And although growth in the emerging markets as a group will likely remain positive this year, global economic growth, measured in terms of market-price exchange rates, is now likely to be negative (see chart a). In terms of growth adjusted for price differences between countries, which gives more weight to the emerging markets, global growth could be positive, but still the weakest since the 1970s. With price inflation down markedly as commodity prices drop back and spending growth weakens, interest rates are being cut to record lows in most major economies. But the ongoing credit crisis means that global financial markets remain under severe strain, even though there have been some signs of stabilisation in recent months.
 

 

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