By Patrick Worsnip
UNITED NATIONS (Reuters) - The United Nations on Wednesday predicted a fragile, Asian-led recovery next year from the world financial crisis, but said the risk remained of a "double-dip" recession if governments rapidly ended support.
Stimulus packages deployed by many nations had played a large part in reversing the downturn that began in 2007 and that has been widely blamed on the collapse of a global housing bubble, said a report by the U.N. economic division.
But the annual report, "World Economic Situation and Prospects 2010," warned that the recovery was "far from robust" and could come to an abrupt halt if the packages, which it put at $2.6 trillion (1.6 trillion pounds) over 2009 and 2010, were withdrawn too soon.
If governments continued supportive policies, the report predicted a "mild" worldwide growth of 2.4 percent in 2010.
That compares with 3.1 percent forecast by the International Monetary Fund on October 1. The U.N. report also said output would contract this year by 2.2 percent, compared with the IMF's 1.1 percent drop. But U.N. officials said the discrepancies were largely due to different calculating methods and the findings were broadly in line.
The latest U.N. figures for 2010 were significantly higher than the world body's mid-year estimates in June, both for world output and for all major economies except Japan, for which it almost halved its growth forecast.
But the report cautioned that "the recovery is uneven and conditions for sustained growth remain fragile." The rebound had been partly caused by firms restocking inventories rather than responding to stronger demand, it said.
"An early phasing-out of stimulus measures could therefore exacerbate these weaknesses in the global economy and abort the nascent recovery," causing it "to dip into a double recession," the report said.
A "double-dip" recession is one where a recession is followed by a brief period of growth, then another recession. IMF chief Dominique Strauss-Kahn said in Singapore last month he did not believe that would happen.
STRONGER U.S. GROWTH
"It is extremely important that these recovery efforts continue to be sustained, precisely because of the very tentative character of the recovery thus far," U.N. assistant secretary-general Jomo Kwame Sundaram told a news conference.
Rob Vos, a senior U.N. economic official, suggested that moves to end stimulus packages should await a rebound in consumption and employment, despite concerns in some countries over fiscal and inflation pressures.
On the U.S. economy, the U.N. report was more bullish than the Washington-based IMF, predicting 2.1 percent growth in 2010 compared with 1.5 percent, a figure Strauss-Kahn said may have been pessimistic.
The world body forecast only 0.9 percent growth for Japan and 0.4 percent for the euro zone, but 8.8 percent for China. Developing countries, especially in Asia, were expected to show the strongest growth next year, it said.
The U.N. report also warned of the impact on the dollar if U.S. foreign debt continued to grow.
"Further rising external indebtedness of the United States .... will keep downward pressure on the dollar, and the risk of a hard landing of the world's main reserve currency will remain high," it said.
The report called for a gradual rebalancing of the global economy to avoid a return to what it called the unsustainable pattern of growth that caused the global crisis.
Private demand would need to take the place of government efforts; greater weight would need to be given to investment; and net exports would need to grow in major deficit countries, such as the United States, while domestic demand grew in major surplus countries, especially in Asia.
(Editing by Eric Walsh)
