Banks, UN warn of impending recession
Posted
Another big investment company in the US is warning of an impending recession in the American economy, while the United Nations (UN) has warned US economic problems could trigger a world recession.
Goldman Sachs says the American housing and credit woes suggest the US economy "is falling into recession".
In a research note to clients the investment giant says it expects economic activity to contract modestly this year, followed by a gradual recovery next year - and it says the weakening economy will force the Federal Reserve to lower interest rates to 2.5 per cent by the third quarter.
Earlier this week Merrill Lynch said a recession was a present day reality for the world's biggest economy.
UN warnings
Meanwhile, the United Nations has warned of "clear and present dangers" of the world economy coming to a near standstill this year because of US housing and credit problems and the weak dollar.
In an annual report, the world body forecast global economic growth at 3.4 per cent for 2008, only slightly lower than last year, but said that under a pessimistic scenario, if US difficulties were acute, it could be just 1.6 per cent.
The bursting of a housing bubble in the United States last year and a crisis over subprime mortgages has caused uncertainty across financial markets around the world, said the World Economic Situation and Prospects 2008.
The US problems "could trigger a worldwide recession and a disorderly adjustment of global imbalances," the report said.
"The recent global financial turmoil has heightened these risks and shown them to be clear and present dangers."
A senior UN official, Jomo Kwame Sundaram, says there is about a 50 per cent chance of recession.
"We are all hoping very much that it can be slowed down and that there will a number of adjustments, which can be moderate adjustments, rather than meltdown situation, which could have catastrophic and unpredictable consequences," he said.
- ABC/Reuters
