The International Monetary Fund has warned severe fallout from the terrorist attacks in the United States could trigger worldwide recession.
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NATO Secretary General, George Robertson (left), speaks with Italian Defence Minister Antonio Martino (centre) and U.S. Deputy Secretary of Defence Paul Wolfowitz (right) during a NATO defence ministers' meeting at NATO headquarters in Brussels.
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But the 183-nation bank said the outcome could still be avoided by aggressive policies to stimulate growth.
Fears a large-scale military assault could worsen economic conditions abated slightly yesterday when the US indicated it was not seeking full military help in its "war on international terrorism".
Following a meeting with NATO defence ministers yesterday, US Deputy Defense Secretary Mr Paul Wolfowitz said the US is unlikely to request full military action from NATO in the coming conflict.
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"If we need collective action, we'll ask for it. We don't anticipate that at the moment," he said, playing down expectations of imminent or spectacular US military action.
IMF chief economist Mr Kenneth Rogoff called a recession in the United States a "done deal". But later in his briefing he sought to soften that comment by saying it was still too early to tell whether the September 11th attacks would push the already weak US economy into a full-blown recession.
Mr Rogoff said the real question was whether the United States had entered a sustained recession or would bounce back quickly.
"The global economy was already flirting with recession because of a longer-than-expected slowdown in the United States and spreading weakness around the world," the IMF said in its latest World Economic Outlook forecast.
In the US though, the stock market, which rebounded earlier this week after a steep plunge last week, resumed its downward slide as more airline layoffs and corporate earnings warnings sent investors running for cover. Asian stocks had a mixed opening, looking for direction following the US losses.
Hopes for a quick recovery seemed to recede as ratings agency Standard & Poor said the attack would push the US into recession and halt global economic growth in the coming quarters.
Even before the attacks, the IMF had slashed its global growth forecast to just 2.6 per cent for this year. That would be the poorest showing since 1993 and down 0.6 of a percentage point from their May forecast of 3.2 per cent growth for 2001.
The IMF said even its reduced figure of 2.6 per cent may not be realised depending on the severity of the fallout from the terrorist attack which Mr Rogoff said was having "a negative effect on activity now in many regions of the globe".
AP