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London: World economic misery spread yesterday with forecasts of a global recession running well into 2009 as job losses mounted.
The global downturn, meanwhile, prompted Switzerland's central bank to make a surprise full percentage point cut in interest rates yesterday, a third reduction in quick succession aimed at stopping the economy sliding into recession as the global outlook worsens fast.
The Swiss National Bank said it had lowered its target band for the 3-month Swiss franc Libor to 0.50-1.50 per cent from a previous 1.50 to 2.50 per cent range. The central bank would provide generous liquidity to bring the Libor rate down to the mid-point of the new range, or 1.00 per cent, it added.
"International economic conditions have worsened appreciably, bringing a higher risk of a marked slowdown in economic activity in Switzerland next year," it said in a statement.
Yesterday's cut, which was announced three weeks before a regular quarterly review, takes Swiss rates to their lowest level since March 2006.
The Swiss franc fell to its lowest level against the dollar since August last year after the cut, while euro zone government bonds gained and Swiss stocks pared some loses, with banks UBS and Credit Suisse limiting earlier heavy falls.
The International Monetary Fund, meanwhile, stepped in to bail out troubled Iceland, leading a $10.2 billion (Dh37.5 billion) help package, and was set to make as much as $40 billion available to Turkey.
Planned layoffs since September at non-financal companies worldwide now total at least 172,000. To that can be added 89,500 in financial sector job losses.
World stocks tumbled more than 2 per cent to 5-1/2 year lows with volatile emerging market equities down more than 4.5 per cent. European shares lost 2.6 per cent and Japanese stocks plunged nearly 7 per cent.
The world's leading economies will likely be in recession for around a year, a Reuters poll of economists showed. The survey of about 250 economists across the Group of Seven nations showed economies facing a recession for as much as five quarters.
'Worst in a century'
"All developed economies will contract in 2009. It's the worst we have had in a century. But to say it's going to look like 1929 again for all these economies is a bit excessive, it's too pessim-istic," said Marco Annunziata, chief economist at UniCredit.
The US Federal Reserve said on Wednesday that the US economy would contract through the first half of next year.
"No end in sight," ING economists said in a note yesterday, a sentiment widely shared by investors.
With investors looking increasingly to governments and other authorities to stop the rot, the IMF moved to prop up both Iceland and Turkey.
The fund approved a $2.1 billion loan for Iceland, battered by a severe banking crisis. It was part of a larger $10.2 billion package.
"The whole IMF package, which includes British and Dutch loans to the Icelandic deposit guarantee agency, is about $10.2 billion, out of which the Nordic countries' share is about a quarter," Finland Finance Ministry Under-Secretary Martti Hetemaki told Reuters.
The fund said Iceland's economy was likely to shrink 9.6 per cent next year and unemployment would quadruple to 5.7 per cent. Sources in Turkey, meanwhile, told Reuters that the IMF was ready to agree a precautionary stand-by agreement of $20-$40 billion, the size depending on talks regarding the country's 4 per cent economic growth target for next year.
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