World economy faces bank, bubble risks, says Zoellick

World economy faces bank, bubble risks, says Zoellick

Singapore: The global economy faces risks next year as rising unemployment may hurt banks and asset bubbles in Asia could undermine confidence, World Bank president Robert Zoellick said on Wednesday.

The good news is financial markets have broken the fall and there is a sense of revival in those markets, Zoellick said in a speech in Singapore. “Most expectations are for a relatively slow growth process. I am actually relatively comfortable about the prospects this year but as I look at 2010 we anticipate some risks," he said.

The recovery won’t be symmetrical around the world, Zoellick said. Governments around the world should follow through with their current stimulus measures even as new stimulus packages may not be necessary, he said at a separate roundtable in Singapore.

Asian nations may still have time before they need to begin tightening policy even as the region, which is expected to grow faster than other parts of the world, may face inflationary pressures, Zoellick said.

The region must be vigilant on asset bubbles, and solutions won’t be easy to determine, he said. Policymakers should consider using other tools before raising interest rates to contain asset price surges, he added.

The global recovery in part has been fuelled by confidence, which may be undermined by asset bubbles, Zoellick said. Banks also face renewed risks as global unemployment rates rise, making it more difficult for consumers to repay loans, he said.