The United Nations said that a prolonged global recession remains possible beyond 2010 in spite of massive government stimulus packages and banking rescue plans designed to end the economic and financial crisis.
The World Economic Situation & Prospects 2009 study issued by the UN said that it expects the world economy to shrink by 2.6% in 2009 after positive growth of 2.1% in 2008 and an annual average growth of 4% during 2004-2007. The study was skeptical about a projected mild recovery in 2010, saying risks remain on the downside.
The study said that "A more prolonged global recession is possible if the vicious circle between financial destabilization and retrenchment in the real economy cannot be sufficiently contained and farther reaching, concerted actions are not taken."
It said market capitalization of banks in Europe and the United States between September 2008 and May 2009 declined by 60% or USD 2 trillion. The stimulus packages launched by wealthy governments to save the banking system have failed to stop the overall ongoing decline.
It said the financial crisis originated in rich countries, but the impacts on poor countries have been disproportionate. The impacts included rising borrowing costs, a collapse in world trade and commodity prices and declined remittance flows to poor countries.
The study projected a decline in per capita income by 3.7% in 2009 in scores of countries and said global unemployment, projected at 50 million in 2009-2010, would double if the economic and financial crisis were to worsen. It said that "Lessons from past financial crises indicate that it typically takes four to 5 years for unemployment rates to return to pre crisis levels after economic recovery has set in."