World Bank: Global Economy Faces Deflation

Friday, July 17, 2009 8:53 AM

By: Julie Crawshaw

The World Bank has given warning that the global economy will fall into a "deflationary spiral" unless urgent action is taken to reduce high levels of excess capacity in industry, Ambrose Evans-Pritchard reported in the UK Telegraph.

Justin Lin, the bank’s chief economist, said factories running idle around world threaten to trap economies in a vicious cycle, risking further spasms of financial stress that require more rescue packages.

"No country can count on currency depreciation and exports as a way out of recession. Unless we deal with excess capacity, it will wreak havoc on all countries,â€