RTTNews - The outlook for the world economy over the year 2009-10 remains poor and the downside risks to Australia remains considerable, a report by Dun&Bradstreet said Wednesday.

In its quarterly Global Economic & Risk Outlook Report, the firm noted that governments and central banks have not yet succeeded in breaking the adverse feedback loop between the financial system and the real economy.

This link makes it imperative to revive the banking sector, as the crisis which began in this industry has spread to other areas of the financial sector, as well as to emerging markets in the past six months, the D&B report said.

The firm indicated that recent data, including a significant upturn in capital markets showed that the slowdown was leveling off. Further, the Chinese market seemed to be offering a degree of stimulation to global trade through its robust fiscal stimulus package, the report said.

The firm said those countries implementing robust fiscal stimulus packages or exporting minerals to China would be in a stronger position to weather the global economic storm. However, D&B said the events of recent months are a correction to market over-reaction rather than the start of a broad-based economic recovery.

For the Australian economy, there remained considerable risks, atleast in the short term the report said. In particular, if the global economy takes longer to recover than currently expected and international demand for commodity exports remains low in comparison to previous years, economic growth will continue to be impacted In addition negative wealth impacts could curtail consumer spending even further than anticipated, it said.

The firms forecasts the country's economy to contract by 0.9% this year, but grow slowly by 0.7% in 2010. The firm expects the jobless rate to touch 8.5% by the end of next year.

On the other hand, D&B said there were some positive signs for the economy as the country's financial sector remained stronger than those in other countries. Moreover, as the central government implemented monetary and fiscal policies quickly, the economic decline shouldn't be as steep as other developed economies are experiencing, it noted.

The firm expects the Australian economy to stabilize in the fourth quarter of this year, reflecting a modest upturn in global activity.

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