World headed for `long and deep’ recession: Canadian bank

December 18th, 2008 - 9:56 am ICT by IANS  

Toronto, Dec 18 (IANS) Canada’s top bank has warned that the world is heading for a “long and deep” recession.Scotiabank, which is the country’s second largest bank with operations in about 50 countries, Wednesday said the developed world could see virtually no economic gain till 2012.

Making this dire warning, Scotiabank chief economist Warren Jestin said the resource-rich Canadian economy too may not bounce back till 2011 because of declining commodity prices.

He said the Canadian auto industry heartland of Ontario will be the worst hit.

Though “Ontario is truly at the epicentre of the recession, even the western provinces (of Canada) will be dragged down in economic decline over the next couple of quarters”, he said.

With the North American auto sector struggling to survive, Jestin said China will account for much of growth in this industry in the coming years.

According to the forecast, the housing market in North America will also take years to recover.

Mark Carney, governor of the country’s national bank, the Bank of Canada, also joined Jestin in warning that the economic downturn will only deepen in 2009.

However, the steps being taken by the governments will eventually end the crisis, said Carney.

“It is sometimes hard to see the end of the crisis, but end it will,” he said.

“The actions that policy-makers are taking will be effective. The global economy will emerge from this period of weakness,” he added.

Urging world leaders and economists to search for long-term solutions to the economic crisis, Carney said: “A clear lesson of the current crisis is the need to take a macro-prudential approach to financial stability.

“Macro-prudential regulation seeks to improve the resiliency of the financial system by designing standards and codes to limit the build up of financial and economic imbalances. Put simply, a macro-prudential approach focuses on the forest, not the trees.”

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