Government Spending on Crisis can Backfire According to WEF

Summary: The World Economic Forum (WEF) has warned governments from countries greatly hit by economic recession to scrutinize bailout plans and other fiscal policies to make sure that these interventions will not backfire. On the other hand, experts all agree that 2009 is a grim year for most economic sectors.

The World Economic Forum (WEF) has warned governments from countries greatly hit by economic recession to scrutinize bailout plans and other fiscal policies to avoid such interventions to backfire.

In a report called “Global Risks 2009” released on Tuesday which tackled the implications of the financial crisis, this year is a grim period for most economic sectors.

Companies, economic experts, and business leaders took part on the annual report on global risks that focused on rising unemployment rate, low consumer confidence, liquidity shortage, and highly volatile market condition.

Meanwhile, the bottom line of the report was that government huge spending can potentially backfire such as financial assistance to sectors including banking institutions and automakers which are greatly hit by economic slowdown.

According to the report, countries such as US, France, UK, and Australia may experience big financial deficits as governments are continuously aiding sectors hit by recession.

In a published report, Zurich Financial Services chief economist Daniel Hofman said that short-term plans may undermine the long-term solution for the problem.

WEF’s annual meeting will be held in Davos, Switzerland on January 28 and will be participated by world leaders, experts, and media reporters.