In spite of the debt crisis in Europe, the global economy will avoid a double-dip recession, according to The Conference Board of Canada’s World Outlook-Summer 2010.

“While there are certainly risks to the global economy, it is not expected to slip back into recession, thanks to healthy growth in the Asia Pacific region and in Latin America,” said Kip Beckman, principal research associate.

The Conference Board forecasts that the world economy will expand by 3.5% in 2010.

The euro zone is expected to lag, with growth of only 1.1% this year. There is a chance that the region could slip back into recession toward the end of the year, according to the outlook. The Conference Board notes that inventory restocking and fiscal stimulus have been responsible for most of the region’s recent economic activity, but both of these supports are fading. Many countries in Europe have little choice but to further restrain spending due to ongoing pressure from foreign investors to reduce huge deficits.

Both Asia-Pacific and Latin America emerged from the 2008-09 recession in fairly good shape, because their banking sectors generally stayed away from risky investments in mortgage-backed securities. Real gross domestic product across the Asia-Pacific region is expected to increase by 5.9% in 2010, and by a more substantial 8.3% when the troubled Japanese economy is excluded.

China, meanwhile, will experience an inevitable and necessary decline in economic growth, according to the Conference Board. However, it notes that the Chinese government appears to be taking the necessary steps to avoid a hard landing.

Real GDP in Latin America is forecast to grow by a healthy 4.5% this year. The outlook points out that all major economies in the region are expanding, with the exception of Venezuela. Unlike previous debt crises, the region’s stronger economic fundamentals will allow Latin America to avoid most of the negative repercussions of the current European situation, the Conference Board says.

IE