In turn, the slowdown in the major economies of Asia and Latin America could undercut recovery efforts in the United States, which has been banking on exports to countries such as China to boost anemic job growth at home.
“We have to brace for years of morass,” said Pascal Lamy, director general of the World Trade Organization. “I don’t see where good news comes from.”
The International Monetary Fund on Monday downgraded its projections for growth in developed and developing economies. The agency now expects the world economy to grow by 3.3 percent this year and 3.6 percent in 2013, down slightly from estimates in July.
The projections for the euro zone were especially grim, with the region expected to contract by 0.4 percent in 2012 and eke out growth of 0.2 percent in 2013. The United States was forecast to trudge along through 2013 at a roughly 2 percent rate of growth.
These lackluster projections bode poorly for emerging economies that depend heavily on exports to Europe and the United States. China, for instance, is now expected to grow by less than 8 percent this year, dramatically slower than its double-digit expansion of recent years.
“Spillovers from advanced economies and homegrown difficulties have held back activity in emerging market and developing economies,” the IMF wrote. “Looking ahead, no significant improvement appears in the offing.”
Officials in developing countries are wary of addressing the current slowdown in the same way they tackled the previous crisis — by borrowing vast amounts of money to finance aggressive short-term efforts at boosting growth.
New stimulus programs have been cautious, and China in particular has been hesitant to take steps that might boost bank lending to consumers and businesses in the short term but add to deeper problems in the financial system.
Indian officials are more constrained this time around by high inflation and budget deficits. At the same time, their proposals for reform, which aim to put the economy on a sounder footing, face intense local opposition, particularly from small retailers who fear competition from multinational chains such as Wal-Mart.
Brazil has slipped from star-performer status as its growth slows and the country turns to new tariffs to try to make up for its declining edge in manufacturing.
“If there is a substantial slowdown in emerging and developing economies, this doesn’t bode well for the global recovery,” said Abdul Abiad, deputy head of the IMF’s research department.
As major emerging economies slow, they are likely to reduce their imports of machinery and high-tech products produced by more advanced countries. This trade has been a bright spot in recent years for countries such as the United States and Germany.
The United States could already be feeling the effect; its total exports expanded by only 6 percent through the first seven months of the year, on a seasonally adjusted basis, far less than the 16 percent increase for the same period from 2010 to 2011. And these exports have been flat since March.
Countries such as Canada and Australia, which rely heavily on exports of commodities such as coal, copper and iron ore, will also feel the pinch as global demand falls.
Meanwhile, as Chinese investment at home slows, it may undercut nations such as South Korea, Taiwan, Malaysia and others that often produce components for final assembly in China, the IMF said in a report last week.
The global slowdown will be at the top of the agenda when the IMF and World Bank hold their annual meetings in Tokyo this week. There is likely to be extensive discussion of the most acute threats to the world economy, which are still seen as coming from the developed world. These include the financial crisis in Europe and the prospect in the United States of dramatic government spending cuts and tax increases, dubbed the “fiscal cliff,” which are scheduled to take effect at the end of the year.
But economic experts at the IMF, World Bank and elsewhere are growing increasingly worried about threats arising in developing nations as well. These include concerns that the leadership transition in China this fall could interrupt any further opening of the Chinese economy. Meanwhile, the process of reform remains slow in Russia, India and elsewhere, potentially constraining economic activity.
Still, developing nations on the whole are still growing at a far faster rate, estimated at 5.3 percent for 2012, than the industrialized world, which is expanding at a tepid 1.3 percent this year, according to the latest IMF projections.
But developing nations remain largely dependent on exports to the developed world that have begun to wane – the IMF forecast a sharp slowdown in the growth of global trade.
“What we are looking at is a synchronized global slowdown,” said Nariman Behravesh, chief economist at the IHS Global Insight consulting firm. He said that the boost from stimulus spending by governments in 2009 and 2010 is diminishing and that weak economic conditions in the United States and Europe are undercutting exports from developing nations.
The global financial crisis that spiked in 2009 and the deep recession it caused saw dramatic decline in growth, trade and jobs. Governments and central banks around the world responded with a rush of measures aimed at boosting lending and rekindling economic activity. Governments teed up trillions of dollars in new spending.
In the process, developed countries ran up their public debts to levels not seen since World War II, and they are now constrained in spending more.
By contrast, most developing nations are not burdened by such steep debts. Still, many are hesitant to counter the current slowdown with government spending, said Hans Timmer, chief development economist at the World Bank.
He said leaders of countries such as India and China are concluding that the main barrier to economic growth is structural — in other words, their domestic restrictions on investment activities and foreign ownership. The flood of spending unleashed in 2009 and 2010, Timmer said, “helped them through the shock, and it helped the world economy, but it did not help their economic structure.”