"The distinct escalation of the global financial and credit market crisis since September has caused UBS economists to again revise their already cautious economic forecasts downwards," the bank said.

UBS said the sustained losses on the equity and real estate markets in the United States mean that a recession for the country is imminent.

The firm added that US households have been living beyond their means for years and while recovery will begin in the middle of next year, it would be sluggish.

The economists predict further US interest rate cuts as well as additional financial stimulus packages.

As for Europe, UBS said a recession is inevitable and the downturn will dramatically affect countries such as Great Britain and Spain, which, like the US, are experiencing the collapse of previously overvalued real estate markets.

Germany and Switzerland should fare better, as they avoided excesses in the real estate market and in private consumption.

"Overall, UBS economists expect Europe's economy to enter into a recession almost in synch with the US," the Swiss firm said.

In Asia, UBS said the Japanese economy will be the hardest hit and will stagnate in the next year.

Large countries such as China, India and Indonesia are predicted to fare better, as they have a smaller export ratio than smaller Asian nations.

Excluding Japan, China's exports account for around 40% of Asia's economic output.

"China has room to manoeuvre in both its fiscal and monetary policy, making it possible to counteract a decline in economic growth of well below 8 per cent," UBS noted.

China experienced growth of 11.8% in 2007, falling to 9.5% this year.

UBS expects Chinese growth to fall again to 7.8% next year before recovering to 9% in 2010.
The bank predicts the United Kingdom will be the hardest hit with growth plummeting to -1.4% in 2009, which is worse than the forecasted -0.7% growth for the US.

Meanwhile, global growth was at 5% last year, 3.7% this year and is expected to fall to 2.4% in 2009, but recover to 3.8% in 2010.