New International Monetary Fund figures show world trade collapsed by 45% over the last three months of 2008, as the International Labour Organisation (ILO) warns that up to 51 million jobs could disappear by the end of this year.
The IMF’s World Economic Outlook update, released this morning, is predicting global growth to slump to 0.5% over 2009, the lowest rate since WWII. This is a massive downwards revision of roughly 1.75% from its November update.
Advanced economies are predicted to contract 2% in 2009, with the UK hit hardest.
The report says the global economy is in “a pernicious feedback loop between the real and financial sectors” triggered by the collapse of stock and credit markets, and that recovery will not happen until governments take steps to restore confidence in markets.
The organisation says the global economy is projected to experience a gradual recovery in 2010 of up to 1%, aided by continued efforts to ease credit strains as well as expansionary fiscal and monetary policies, with growth possibly picking up to 3% thereafter.
“However, the outlook is highly uncertain, and the timing and pace of the recovery depend critically on strong policy actions.”
The IMF is forecasting that advanced countries will average budget deficits equivalent to 7% of GDP this year, which in New Zealand would equate to roughly $18 billion.
Meanwhile the Financial Times is reporting the ILO saying this year will finish with 18 million more unemployed people than 2007, with a global unemployment rate of 6.1% under its most optimistic scenario.
A more realistic scenario forecast that 30 million more people may lose their jobs, pushing the world's unemployment up to 6.5%, compared to 6.0% in 2008 and 5.7% in 2007.
In the worst-case economic scenario, the Global Employment Trends report says 51 million more jobs could be lost by the end of this year, creating a 7.1% global unemployment rate.
"If the recession deepens in 2009, as many forecasters expect, the global jobs crisis will worsen sharply. We can expect that for many of those who manage to keep a job, earnings and other conditions of employment will deteriorate", the report says.
In October the ILO previously estimated that 20 million jobs would disappear by the end of 2009 because of the financial crisis.
In better news for New Zealand, most job creation in 2008 came from South Asia, Southeast Asia, and East Asia, while developed economies and the EU lost some 900,000 jobs on a net basis.