The global economy is not heading towards a worldwide depression despite the appearance of a probable recession among OECD countries, according to a new report released by CIBC Thursday.

Economies — and equity markets — could rebound next year, said Jeff Rubin, CIBC World Markets chief economist and strategist, in his latest Canadian Portfolio Strategy Outlook Report.

"Global growth is unlikely to fall below 3.5 per cent this year or next. While that's a big step down from the growth of the last several years, it is still a far cry from the growth rates that historically have been associated with a sustained bear market in global commodities," Rubin said.

Stock rebound

That means Toronto's TSX bellwether exchange could drop as far as 9,500 points this year with the prevailing market gloom. But the Canadian stock market could rebound next year as investors realize the economy is relatively strong and commodity prices are at decent levels.

Rubin predicted a drop of 31.5 per cent in stock prices, jumping back to 12,000 points by the end of 2009, a bounce back of 28.7 per cent.

Rubin, who is famously bullish on oil prices, said crude levels should return toward the June peaks of $130 US in 2009 as demand from developed countries and newly developing nations, such as China and India, restarts.

Oil prices have hovered around the $90 US a barrel since the global financial crisis began in September.

"Oil demand destruction in the US and the rest of the OECD is modest in comparison to continued demand creation in most of the developing world, where consumers don't pay full world oil prices," Rubin wrote.

International investors often buy and sell Canadian share issues depending upon the level of world commodity prices, especially crude oil.

Growth story

Most major western economies, Canada, Japan the United States and the countries of the European Union, should see negative growth into 2009.

But large nations, like India, China and other countries in Asia, will not feel the drastic effects on the credit squeeze to the same degree as the OECD nations.

Rubin said Canada will grow at a rate of 0.6 per cent pace in 2008, rebounding somewhat to a 1.1 per cent economic expansion next year.

According to CIBC, the U.S. will outstrip Canada in terms of economic growth for both years.

Meanwhile, the world economy will expand by 3.8 per cent this year and 3.5 per cent in 2009.