Return to recession is unlikely
A long period of slow economic growth is ahead, but a world recession is unlikely, according to a new report by Northern Bank.
Its latest Global Scenarios report shows the European debt crisis and instability in the US has dented confidence in the global recovery, but the major economies should avoid recession.
It said the slowdown in the first half of the year was expected, due to factors such as soaring oil and food prices and the Japanese earthquake.
Although prices have generally stabilised, the report finds that turmoil in Europe and the US means global recovery will be weaker and take longer.
According to the report, it would take a further hit of 10% to 15% in global equities to cause a recession in the US.
Northern Bank chief economist Angela McGowan said the financial shock to markets was not considered large enough to spark a worldwide recession.
China's move to end policy tightening, as well as Japan's post-earthquake rebuilding efforts are believed to be supporting a global rebound.
Recovery seen in the US before the financial crisis is expected to continue, albeit at a slower pace.
However, Ms McGowan warned: "Although we do not expect a global recession - and we look for a small rebound in Quarter 4 - this is far from a rosy scenario.
"Looking into 2012 and the years to come, the developed economies will face a significant fiscal tightening and this will act as a further brake on growth."
The report forecasts emerging markets will grow strongly, with a "slow-moving" West seeing continued political tension and powers strengthening in the East.
Year on year growth in 2011 for the global economy is revised down to 3.8% from 4.2% in the June report.
Eurozone growth has been revised down to 1.6% for 2011 and 1.1% in 2012. China is expected to grow at 9.3% this year and 8.9% next year.