The global economy was already on the brink of recession before the September 11 attacks on the United States and now faces an even worse prognosis, a new International Monetary Fund report has revealed.
The IMF's flagship World Economic Outlook publication, which takes the pulse of the world's economies twice a year, forecast economic growth of just 2.6 per cent for 2001. Economists view worldwide growth of 2.5 per cent as a level indicative of a global recession.
But the IMF expects Ireland to remain the fastest growing in the euro zone with 6.3 per cent growth.
This new global forecast factors out the attacks which were too recent to be fully analysed, but it was already sharply lower than an April estimate of 3.2 per cent and well below the 4.7 per cent global expansion the world enjoyed last year.
The fund said forecast reflected a delayed US recovery, a sharp European downturn and a Japanese economy on the brink of recession.
But the IMF said growth will remain just above recession levels at 2.6 per cent this year.
And the international lender is more optimistic about 2002, hoping lower interest rates and other policy actions taken to counter the effects of the attack will produce a robust 3.5 per cent expansion in 2002.
Region by region, the report paints a bleak picture of how the global economic outlook has stumbled badly since the IMF's last publication of the WEO in April.
Growth in the United States is now forecast at 1.3 per cent this year and 2.2 per cent in 2002 compared to April's forecasts of 1.5 per cent in this year and 2.5 per cent next year.
The 12-nation euro zone is now expected to expand by 1.8 per cent this year and 2.2 per cent in 2002, down from April's estimates of 2.4 per cent and 2.8 per cent respectively.
That forecast has been dragged lower by a sharp downward revision to Germany's growth prospects, now seen at 0.8 per cent this year and 1.8 per cent in 2002 compared to an earlier view of 1.9 per cent and 2.6 per cent for those years.
Because all three major centers of economic activity are all grinding slower, the IMF notes, "the risk of a self-reinforcing downturn whose consequences could prove difficult to predict" has increased.
All of the IMF's latest forecasts must now be thrown into question by the events of September 11th, which caused most on Wall Street to cut forecasts even as the full impact of the unprecedented events remains unclear.
But the report was not all gloom and doom, and cited some bright spots around the globe.
Russia, awash in oil revenues, is expected to post 4 per cent economic growth this year and most other former Soviet states are also seen performing well.
China is expected to continue reaping rewards from a more open economy with 7.5 per cent growth this year while India is expected to post solid growth of 4.5 per cent.