“We expect a stormy 2008,” Oliver Wyman said Thursday in its State of the Financial Services Industry report. “While governments, central banks and regulators scramble to address the aftermath of the subprime fallout, several other crises are mounting.”

The slowdown in European real estate, especially in the UK and Spain, the potential weakening of the U.S. dollar and a possible collapse in commodity prices may hurt the global economy, according to the report. A drop in Chinese and Indian stocks may be a fourth “potential disruption” this year, Oliver Wyman said.

“North American financial-services firms will have a tough year,” Oliver Wyman said. “Market uncertainty, combined with further writedowns and expected home-price and loan-volume declines, implies more squeezes on earnings. Banks most likely will have to increase loan-loss reserves.”

Growth in western Europe is likely to suffer in 2008, while Latin America has a positive outlook and “growth opportunities exist” in Singapore, Taiwan, Indonesia and Korea, according to the report.

Private equity is an industry that’s likely to grow in 2008, the consulting firm said. “LBO activity will rebound soon,” it added. “There are many opportunities.”

Senior executives and investors are gathering at the World Economic Forum in Davos, Switzerland, amid concern the world’s biggest economy is sliding into a recession. The mood contrasts with the buoyancy of last year’s meeting, where guests celebrated a bumper year of corporate profits and bonuses, and the strongest global economy in three decades.

The U.S. Federal Reserve this week lowered the target rate for overnight bank loans in the first emergency cut since 2001 as it tries to prevent a recession. President George W. Bush is seeking a package of tax cuts totaling at least US$150 billion to boost growth.

Economists at Goldman Sachs Group Inc. and Merrill Lynch & Co. are predicting the U.S. economy will fall into its first recession in seven years in 2008.

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