Bangkok--16 May--Centre for Asia Pacific Aviation The United Nations' (UN) Department of Social and Economic Affairs has lopped 1.6 ppts off its world GDP forecast of just four months ago and now expects growth of just 1.8% in 2008 and 2.1% next year. The body’s mid-year review leads with the statement, “in the wake of numerous challenges, the world economy is teetering on the brink of a severe global economic downturn”. The UN’s ‘optimistic scenario’ sees growth in the US this year of just 1.0% and 1.2% next year, but the ‘pessimistic scenario’ sees the US economy contracting by 1.3% this year and growing by just 0.3% in 2009. If this scenario plays out, global growth would be just 0.8% this year and 1.4% next. The baseline forecast for Japan and Europe sees growth slowing from 2.1% and 2.6% in 2007, respectively, to 0.9% and 1.1% in 2008, with similar levels in 2009. But Asia will also be hit by the global slowdown, with the UN now forecasting growth in East/South Asia and West Asia of 5.9% and 4.0%, respectively this year, down from 8.5% and 5.2% in 2007. The pessimistic scenario sees growth in these regions falling to as low as 5.0% and 2.9% this year - well below the growing inflation rates in several countries. The economy of East Asia’s biggest driver, China, is expected to “moderate notably”, as a result of deceleration in exports, as well as other curbing effects, such as tightening monetary policy, appreciation of the renminbi and rising labour costs. The UN noted, because of strong trade ties with the US and other industrial countries, GDP growth in China could slow to 5.0% in 2008 under the pessimistic scenario. Air traffic in China is already slowing rapidly, prompting concerns over the earnings outlook for the sector. The slowing world economy has prompted the International Energy Agency and OPEC to this week cut their world oil demand forecasts for this year, which (in theory) should put downward pressure on oil prices. But this would be cold comfort to the airlines. A dramatic slowing of the world economy will choke air travel demand, starving the industry of much needed revenue. Airlines that have not used the recent good times to restructure their businesses are flying into troubled skies.