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Home News World Economic Outlook for 2010 Looks Promising, But Risk of a Double Dip Remains


Economic Outlook for 2010 Looks Promising, But Risk of a Double Dip Remains
added: 2010-01-12

The G8 and regional economies have averted a global economic depression. The IMF in its 4Q-2009 assessment estimated that the global economy shrank 1.1% in 2009 but will grow 3.1% in 2010. According to ABI Research vice president for forecasting Jake Saunders, “2010’s expected growth has been created through very necessary but very substantial government debt. Underlying organic demand — demand from consumers — remains weak while B2B demand, though more robust, has been limited by restrictions on credit by cautious banks.”

Governments will eventually need to throttle back the stimulus packages. If they do it too soon, there is a danger that the organic demand from consumers and B2B will be unable to pick up the slack. If they leave it too late, there is a concern that regional economies might get swept into an inflationary phase with too much money in the system and asset prices on a bull run.

“Regional economies are, in fact, more at risk from deflationary pressures,” says Saunders. “The euphoria of the 2H-2009 bull run glossed over the fact that this global recession was spawned in the financial sector. Banking-related recessions take longer than other types of economic recessions to recover. ‘Toxic’ mortgages are still on the books of many banks.”

Consumer confidence in Western economies is likely to take time to recover. A key indicator to follow is unemployment. Corporate earnings have increasingly been in the black since 2H-2009. This is to be celebrated, but a large portion of that profit can be attributed to “adroit” management of capital and operational expenditure. More telling indicators are revenues, and for many industry sectors these are still very depressed. Therefore B2B and B2C purchasing remains constrained.

Unemployment figures for the US, UK and Germany are 10.2%, 8% and 8.1% respectively.


Source: ABI Research

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