Global recession ends, economists predict recovery in 2010
Top economists from Moody's and the International Monetary Fund say Asia and Latin America will lead the world's economic recovery in 2010, and the United States will mount comeback, too.
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China, India, Australia, and a number of Asian countries are already expanding. The IMF predicts China's economy will grow by 10 percent in 2010. On the other hand, Japan and Europe will likely see growth of only 1 to 1.5 percent.
The US economy, predicts the IMF, is expected to expand at a 2.7 percent rate. The IMF anticipates a global growth rate of 4 percent for 2010.
Which countries have been slower to recover?
Contrary to previous recessions, developed nations – including the US, Britain, and countries in continental Europe – are recovering relatively slowly compared with their still-developing counterparts.
The lag is primarily due to "underlining structural weaknesses, high debt, and low savings," says Stroppiana. In the US and Britain, in particular, high unemployment combined with high household debt and continuing home-mortgage foreclosures means that consumers simply aren't in a position to drive recovery.
"Unemployment typically continues to rise even after a recession has ceased," says Stroppiana. "Part of the reason is while firms still have very weak revenue and sales outlook, they continue to trim costs, part of which is staffing levels."
Even on this front, there are telltale signs of recovery. German tour operator TUI AG said recently that bookings have risen enough to bring its 1,800 employees back to work full time. In May 2009, it cut staff hours.
Still, high debt levels are impeding recovery in Greece and Eastern Europe. As the world's largest economy, the US will play an important part in the global recovery, but its slow rebound means its role will not be as big as in previous recessions. This represents a broader shift, says Stroppiana. The transfer in global demand to emerging markets has been "an ongoing process."
What might derail a global recovery?
The most immediate threat to the global economy will come from withdrawal of stimulus measures put in place to stem the crisis. As governments begin to address their debt levels and raise interest rates from their current emergency settings, some countries will be at risk for another downward lurch.
In the longer term, the global community will have to address the issues that caused the financial crisis. "We're going to have a recovery," says Johnson. "But we haven't fixed the underlying problem."
That problem includes "distorted incentives in our financial system," Johnson explains, whereby the US and other Western governments guarantee reckless risks made by large banks. If the risk works out, the banks enjoy the financial gains; if it doesn't, taxpayers foot the bill.
"This problem has actually been worsened by the crisis and bailout," Johnson says.
The rise in commodity prices since 2009 is also something to watch, says Stroppiana. Increases in commodity prices were driven primarily by imports and demand from emerging markets, in particular, China.
But if prices were to continue to rise, which Stroppiana does not currently expect, this would erode household buying power and affect inflation rates, which in turn could threaten the economic recovery.