The world economy could shrink 1-2 percent this year, World Bank President Robert Zoellick said, as industrial output in global growth engine China grew at its slowest rate on record.
In the world's second-biggest economy, Japan, revised data showed the pile of unsold goods doubled in the fourth quarter, as its economy shrank 3.2 percent, the worst contraction since the 1974 oil crisis.
Japanese shares fell more than 2 percent, and Europe's followed suit, as confidence in a rally this week petered out.
Zoellick told Britain's Daily Mail he expected the global economy would shrink about 1-2 percent this year.
"We haven't seen numbers like that since World War Two, which really means the 30s, so these are serious and dangerous times," he said.
His comments came as G20 finance chiefs prepare to meet in Britain amid doubts they will make much headway due to divisions about how best to fight the downturn.
China's annual industrial output growth slowed to 3.8 percent in January and February, the slowest on record and down from 5.7 percent in December, as exports plunged and large infrastructure projects did not fill the vacuum.
However, new domestic-currency lending in February topped 1 trillion yuan ($146 billion) for the second month in a row as banks responded to a government call to finance its stimulus programme, spurring optimism the economy could rebound soon.
With 10 months to go in 2009, China is already more than half way towards its goal of at least 5 trillion yuan in new bank lending.
In export-driven Japan, companies such as Toyota Motor Corp and Sony Corp have been aggressively scaling back production and cutting jobs to cope with collapsing demand.
"The data confirm that Japan's economic state is quite severe. We see a sharp decline in exports, which puts Japan in a bad situation, because exports are falling everywhere," said Seiji Adachi, senior economist at Deutsche Securities.
The Nikkei average fell 2.4 percent, after surging nearly 5 percent in the previous session alone, while the broader Topix plumbed its lowest close in 25 years.
EX-BILLIONAIRES
Finance ministers from the G20 group of rich nations and emerging powers meet this weekend in Britain to prepare for a summit in London on April 2.
Ahead of the meeting, the United States and Britain called on leading economies to ramp up spending to break the recession, but the call has been met coolly by many European nations, who are more focused on regulatory reform.
The European Central Bank said on Thursday it saw euro zone inflation remaining well below its target of close to 2 percent in 2009 and 2010, and the economy would be weak.
In Germany, Europe's largest economy, the Federal Labour Office sharply increased its unemployment forecasts for this year on Thursday, predicting up to 3.7 million unemployed against an earlier forecast of 3.3 million.
Governments are pumping money into their economies, and central banks have been slashing interest rates in an effort to mitigate the severity of the recession.
South Korea said it would spend an additional $4.2 billion to stimulate consumption in Asia's fourth-largest economy, though its central bank kept rates on hold at 2 percent on Thursday, still a record low, for fear of further weakening its currency.
New Zealand's central bank cut interest rates by 50 basis points to an all-time low of 3 percent and said it saw the economy bottoming in mid-year.
Across the Tasman Sea in Australia, one of the few developed countries not yet officially in recession, unemployment jumped to 5.2 percent in February, its highest rate in almost four years.
Another measure of the impact of the crisis was provided by Forbes magazine's annual survey of the world's billionaires, who have collectively seen $2 trillion wiped off their net worth.
A total of 355 people dropped off the Forbes list, with names ranging from former Citigroup chief Sanford "Sandy" Weill to alleged Ponzi scheme mastermind Allen Stanford joining the ranks of ex-billionaires.
