NCPA - National Center for Policy Analysis

First Global Recession Since WW II Predicted

October 15, 2001

There have been no global recessions in the past half-century. In periods when the U.S. faltered, the world economy as a whole kept growing. Or at points when the U.S. was humming along, foreign economies sometimes went into a tailspin.

  • In 1991, for example, the U.S. economy shrank by 0.5 percent -- but the global economy expanded by 2.7 percent.
  • In 1982, the U.S. reported negative growth of 2 percent -- while the rest of the world grew by 2.6 percent.

Now Giles Keating, chief economist at Credit Suisse First Boston in London, and an increasing number of other forecasters predict that the world will plunge into its first global recession since World War II this quarter and next.

  • For 2002 as a whole, they see global growth hitting 0.7 percent at best -- the lowest level since World War II.
  • International trade now accounts for almost 20 percent of global gross domestic product -- up from just 10 percent a decade ago.
  • This means that economies around the world move more in tandem than they used to -- and financial markets are more interlinked and liquid than they were.

Economic analysts say that countries and regions which might once have been relied upon to pull the world out of recession -- Asia, Japan and Europe, for example -- are in no condition to shoulder the burden this time around.

Source: David Fairlamb, "Economic Trends: Hurting in Lockstep," Business Week, October 22, 2001.


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