UPDATE 1-U.N. sees rising risk of world economic recession
(Adds U.N. comments at news conference)
UNITED NATIONS, Jan 9 (Reuters) - The United Nations warned on Wednesday of "clear and present dangers" of the world economy coming to a near standstill this year because of U.S. housing and credit problems and the weak dollar.
In an annual report, the world body forecast global economic growth at 3.4 percent for 2008, only slightly lower than last year, but said that under a pessimistic scenario, if U.S. difficulties were acute, it could be just 1.6 percent.
The bursting of a housing bubble in the United States last year and a crisis over "subprime," or risky, mortgages had caused uncertainty across financial markets around the world, said the "World Economic Situation and Prospects 2008."
Together with the decline of the dollar and imbalances between countries running surpluses, such as China, Japan and major oil producers, and those with big deficits, especially the United States, this could drag world output down, it said.
The U.S. problems "could trigger a worldwide recession and a disorderly adjustment of global imbalances," the report said. "The recent global financial turmoil has heightened these risks and shown them to be clear and present dangers."
"The projection is not yet for recession but the risks are there," said Rob Vos, a division director at the U.N. Department of Economic and Social Affairs. At a news conference, he put the chance of a U.S. recession at "50-50," saying he would have been more optimistic two months ago.
The last U.N. report a year ago proved overly pessimistic. It said 2007 world growth would drop to 3.2 percent but it turned out to be an estimated 3.7 percent, according to the new report.
"CONSUMPTION BINGE"
The 170-page report, compiled by seven U.N. bodies, put U.S. gross domestic product, or GDP, growth at 2.0 percent this year compared with an estimated 2.2 percent last year.
But it warned that could be virtually wiped out if U.S. house prices fell by as much as 15 percent. The economies of Japan and Western Europe, already operating near capacity production, could not take up the slack, it said.
Until now, trade has been increasing its share in most countries' GDP, but a U.S. recession would reduce export growth from China, Japan and Europe, lowering their import demand.
The report found a more positive picture for developing countries' economies, which grew at nearly 7 percent for a third straight year, helped by high commodity prices.
That could continue this year but further dollar depreciation -- Vos said the United Nations predicted another fall of at least 5 percent in 2008 -- would hit them hard as their reserves are held in dollar-denominated assets.
Jomo Kwame Sundaram, U.N. assistant secretary-general for economic development, said an end to a "consumption binge" in the United States would likely lead to lower commodity prices.
The report said that under normal circumstances the U.S. slowdown could be treated with interest rate cuts, but at present that could further weaken the dollar and stronger demand was needed in countries with large surpluses.
China should invest more in health, education and social security while Japan and Europe should end monetary tightening. International action was needed to reach agreement on an exchange rate realignment, the report added.
Sundaram accused the International Monetary Fund of failing to provide international financial regulation.
"The IMF, which should play a leading role in this regard, has not stepped up to the mark and this has partly been compromised by the governance of the IMF, which has undermined its ... ability to work much more effectively," he said.
