MercoPress. South Atlantic News Agency

World faces recession.

The International Monetary Fund lowered the world's growth estimate for this year to just 2,4%, which many economists consider a recession since it's below 2,5%.

IMF Director Horst Koehler speaking in Ottawa during the annual IMF-World Bank general assembly said the world situation is "clearly difficult, although manageable" and predicted a modest recovery in the second half of 2002, but still conditioned to "a certain degree of uncertainty". Just a month ago IMF had anticipated 2,6% world growth in 2001, and 3,5% in 2002.Latinamerica will be particularly bashed by the new world business climate: growth for this year is down to 1,1% and 1,7% for next year.

The European Union estimates are 1,7% in 2001, and 1,4% in 2002, while the United States economy continues to slide: a mere 1% this year and falling to 0,7% in 2002.Japan's situation is more delicate: the country's economy is scheduled to have negative growth this year 0,9% and again in 2002, 1,3%. However Mr. Koehler said that IMF is prepared to help country members with the current situation with "policy counselling, technical assistance and additional financing".

Zero interest rates

Although it's becoming increasingly evident the world was heading for a recession even before the September terrorist attacks, a virtually unheard situation has emerged since in the main world blocks, Japan, United States and European Union, basic interest rates are zero or almost zero.

Japan for example, faced with a banking crisis and entrenched recession, has been resorting to zero rates since early 1999.

United States even after several consecutive drops during 2001, forced the pace after share markets collapsed and consumers stopped spending, and now has a Federal Reserve reference rate of 2%, which adjusted to an annual 2,6% inflation turns real interest rates negative.

The European Union could also be heading the same way, since the basic rate is now 3,5%, and inflation 2,4%. This means real interest rate is 0,85% and could drop further if the threat of recession persists.However this completely new situation is full of surprises and questions: Japan has not managed to cut loose from recession; if the US economy does not bounce back, there's a limit to how much longer the Federal Reserve can keep lowering rates. Besides, American banks are bound to have a higher percentage of riskier loans, as the