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UN warns against premature withdrawal of stimulus

December 03, 2009 15:52 IST

GrowthThe United Nations has cautioned against a premature withdrawal of the massive stimulus measures taken by governments globally since late 2008 that have led to the rebound in the world economy.

"Most of the global demand is currently being held up by expansionary fiscal policies so if this would be withdrawn now then probably we will recede back into negative territory or possibly into worldwide recession," said Rob Vos, director of development policy and analysis from the UN's Department of Economic and Social Affairs.

The recovery in the second half of 2009 would be largely due to the hefty stimulus packages. Pulling out these due to concerns about mounting fiscal deficits and levels of public indebtedness could lead to a 'double dip recession,' he said.

"At this point there is no other source of demand to keep the economies going," Vos added. In a preview of the annual economic forecast, the UN said China and India growing at more than 6 per cent would lead the world economic recovery next year but warned that the bounce-back would remain 'fragile'.

The world economy would experience a 'modest recovery' of 2.4 per cent in 2010 after the world gross product has declined by 2.2 per cent in 2009.

Betwa Sharma in United Nations
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