By Leo Ryan, AJOT
The finish line in the race to global economic recovery is still a long way off, suggests Canada’s Export Development Corporation (EDC) in an in-depth, wide-ranging analysis of current trends.
During an interview with AJOT, Peter Hall, vice-president and chief economist of the federal export credit agency, declared “it is not before 2011 that we see sustainable recovery taking place in the global economy.”
“We really don’t feel that it’s the emerging markets, including China, that will pull everyone out of the recession,” he said.
The pump-priming measures in China, he noted, have mainly stimulated the domestic market, but not foreign trade.
“We will not see a proper recovery until there is balanced growth in China – and this hinges much on Western consumers getting back on their feet again.”
Who will lead the global recovery? Here, Hall was categorical, singling out the United States.
He qualified as “staggering that some can give up on the number one economy in the world. True, in some respects, that Washington has been meandering. But, by George, they are largely dealing with the problems in an effective way.”
Hall indicated that one of main hurdles to overcome has been excesses in the housing markets in the US as well as other countries driven by sub-prime mortgages that precipitated a global financial crisis starting in 2008. “It will take time, just to work things down. We hope to see the US housing market back in better shape sometime in 2010.
Hall described as “exciting” the size of present infrastructure spending in many countries thanks to government stimulus plans. This offered strong opportunities, he said, for various modes of transportation.
“But the deluge of spending could have a relatively short lifespan – a two to three year exercise.”
In a document entitled The Race to Recovery, the EDC offered a global GDP forecast by country.
After declining an estimated 2.5% in 2009, US GDP is seen advancing by 2.1% in 2010. For Canada, the respective numbers are minus 2.3% and plus 2.1%. Mexico’s GDP is expected to bounce back to 2.5% next year after falling 6.5% in 2009.
According to the EDC, Western Europe’s GDP will edge up to 0.8% in 2010 after falling by 4.1% this year.
The document says Japan’s GDP will also progress marginally at 0.7% next year following a 6% decline in 2009.
China remains on a high single-digit growth pace: 8% in 2009 and 8.3% in 2010. India is also holding to its relatively brisk growth level, with the EDC predicting a 5.8% growth in 2009 and 6.2% growth in 2010.
Among other countries, Russia, after a sharp 7.2% drop in GDP in 2009, will experience a small 1.4% growth next year.
In South America, the largest regional economy, Brazil, is forecast to show 3.1% growth next year following a small 0.3% decline in 2009.
The Middle East, North Africa and Sub-Saharan Africa are seen expanding by close to 4% in 2010.
As a group, the GDP of developing countries is seen growing from 1.2% to 4.4% next year while the comparable numbers for the industrialized countries are minus 3.4% and plus 1.6%.
Concerning the global economy as a whole, the EDC estimates growth will attain 2.9% next year versus a 1.3% decline in 2009.
In its assessment, the EDC stressed that “analysts are having difficulty separating the effects of temporary stimulus measures from a resurgence of fundamental demand. The consensus is not bullish. Most forecasters expect that the major economies will muddle through the coming months, and that performance will be anything but spectacular.”
“True recovery,” the EDC stated, “rests with the consumer. Not the burgeoning consumer class in emerging markets, unfortunately. Although an increasingly significant segment of global demand, these consumers still fall well behind the purchasing capacity of those in larger markets.”