SINGAPORE - THE global economy faces serious hurdles next year including 'large-scale' unemployment in rich nations, asset bubbles, and backsliding towards protectionism, the World Bank chief said on Friday.
In a sobering assessment of the fragile status of the economic recovery, Robert Zoellick outlined a list of potential pitfalls to a business forum on the sidelines of an Asia-Pacific summit.
'The reason I am flagging this issue is that we are in the stage of recovery where confidence is very important. If you have asset bubbles that are not properly dealt with, you could again undermine confidence in 2010, which is the year I am more concerned about.'
Mr Zoellick said that continuing high levels of unemployment, particularly in developed nations, would create 'second-wave' effects for banks including defaults on consumer loans, credit cards and mortgages.
The US consumer, who has been the saviour in previous downturns, can no longer be relied upon to drag the global economy out of the doldrums by returning to enthusiastic spending, he said.
'In this environment the US consumer is deleveraging, building savings. He or she is not going to play the role that they played in the past,' he said, adding that the onus was now on the developing world. He also warned of signs that crisis-hit countries are attempting to shore up their economies by reintroducing protectionist measures. -- AFP