After several years of steady growth, world economic activity slowed significantly in 2001 as the United States, Japan and Germany entered recession or an outright shrinkage in economic output.
After a record 10 consecutive years of growth, the giant U.S. economy fell into recession in March 2001. As the year ended there was debate about how long the downturn will continue.
The consensus view is that the recession will be relatively shallow and short. Spurred by 11 consecutive cuts in short-term interest rates, growth is expected to resume by April 2002.
Paul O'Neill, President Bush's treasury secretary, says prior to the terrorist attacks on New York and Washington, the U.S. economy was strengthening. The attacks halted that apparent recovery, causing a sharp drop in travel and hard times for airlines and the hospitality industry.
"On September 10, I think the data rather conclusively show that our U.S. economy was in a recovery period. And the difference between in recovery and then having negative growth in the third quarter which included time after September 11, I think is a direct cost [of the attack] to the American economy. And maybe one percent of gross domestic product is what we have suffered so far," Mr. O'Neill explained.
And the slowdown triggered by September 11 isn't confined only to the United States. It is global. Gordon Brown, the British finance minister, says 2002 will be a testing time for all of the major economies.
"These are testing times, both for America and for Europe, and also clearly for Japan, which is in recession. I am cautiously optimistic about the British economy. Equally, however, I know there is a large measure of risk and uncertainty about what is to happen in the world," Mr. Brown said.
The International Monetary Fund says the world economy grew by only 2.4 percent this year and will grow by the same amount in 2002. The best performing economies are China, India and Russia.
But amid the gloom there was surprising good news in late November. Trade ministers from over 100 countries met in Doha, Qatar and agreed to launch negotiations to further reduce barriers to trade. The U.S. trade representative is Robert Zoellick.
"These global negotiations should demonstrate that trade is a win win venture for both developed and developing countries. In the aftermath of September 11, the agreement at Doha also sent an excellent political signal, that 142 diverse nations can come together to agree on a constructive, positive agenda for people all around the world," he said.
In many developing countries foreign debt remains a heavy drag on economic activity. Pakistan, which after September 11 became a critical ally in the fight against terrorism, has won the promise of some of its debts forgiven. Shavid Burki is a retired World Bank executive who not long ago briefly served as Pakistan's finance minister.
"Pakistan today owes about $38 billion in terms of official debt, which is more than 50 percent of its gross domestic product. And as General [Pervez] Musharaff has been saying on his recent visit to the United States, this is Pakistan's most critical problem," he said.
Pakistan is one of the world's poorest countries. Argentina, by comparison, is classified as a middle income country. It too is saddled with a heavy debt problem. At year's end as the government cut social spending to balance its budget and meet debt payments, there were riots in the capital.
The IMF and western governments were reluctant to extend still more financial aid to Argentina.
Oil prices, which ran up sharply in 2000, fell in 2001, which was good news for oil importers and bad news for oil exporters.
All in all it was not a good year. And the experts don't expect much improvement in 2002.
Part of VOA's Year End Series for 2001