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More global economic pain seen in 2009
(Agencies)
Updated: 2008-12-31 21:10

More bad news

Tuesday brought more dismal economic news in the United States, with single-family home prices down 18 percent in October from a year earlier and consumer confidence plunging to a record low due to severe job cuts.

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"We are not going to be seeing anything fundamentally positive from the US for the time being," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon.

But with central banks cutting interest rates to spur growth, declining oil prices and governments pumping money into the system, Heffernan said there were some positive signs for 2009.

"The blood has been drained and we are now getting a transfusion."

World governments have pumped more than $1 trillion into their economies to keep business afloat and save jobs, and more aid is expected in 2009 as leaders battle to stave off an even deeper and possibly longer recession.

Global credit markets are showing some signs of improvement, but banks remain reluctant to lend to businesses and consumers, fearing a rash of bad loans as economies worsen.

Government stimulus plans, corporate bailouts and rate cuts also take time to be felt, and their full benefits are still being hotly debated by analysts and economists. Global growth, if any, could be very weak in 2009 as a whole even if consumers are coaxed to start spending again, which is key to recovery.

The Indonesian government may announce more fiscal plans on Wednesday to help Southeast Asia's biggest economy withstand the global economic slump.

Indonesia's economy is still expanding, but growth may drop below the 6 percent pace analysts say the country needs to prevent unemployment from rising among its 226 million people.

Mounting job losses are raising fears of social unrest in some countries, and piling pressure on governments to act quickly, even if it means huge deficits and debts that will have to be paid off somehow in the future.

Investors are now looking to January, which will bring a new US administration when Barack Obama is sworn in as president on January 20. He is expected to unveil a government spending program which sources say could range from $675 billion to $775 billion over two years.