|
The scale of the financial carnage was not the only thing to take senior executives and government ministers by surprise; so did the fact that the world markets were much more closely connected than most people had believed.
Last year, CEOs in the Japan and the West were more worried about a global economic downturn than those in emerging markets such as Brazil, Russia, India and China. But, as capital started flowing back to the industrialised economies, it became clear that the emerging economies had equal cause for concern.
At first, the "flight to safety" particularly affected countries with large trade deficits. The sudden reversal of foreign capital inflows forced Hungary, Latvia and Pakistan to seek bailouts from the IMF, for example. But, according to our analysis, the crisis rapidly spread to all the major emerging economies, affecting each in different ways. Declining consumer demand in the US and Europe stalled export-led growth in Asia and Latin America. India was hit by the drop in demand for outsourcing services and the decrease in overseas lending. Oil and commodities exporters experienced a dramatic slump in world commodity prices.
"The idea that emerging economies had 'decoupled'… has been exposed as fanciful."
The Economist
Although the emerging countries are still expected to fare better than the industrialised ones in 2009, the downside of globalisation is clear: a problem that started in the US has now infected all the major economies across the world, emerging and advanced alike.
As CEOs watched the damage spread, short-term confidence reached its lowest point in six years. Only 21 percent of respondents remain very confident about the prospects for growth over the next 12 months, with the exception of Indian CEOs, 70 percent of whom were still remarkably positive. Moreover, the level of confidence has declined in CEOs heading companies of every size in every sector and country.
Michael Smith, CEO of Austraila and New Zealand Banking Group Ltd, speaks on the consequences of the global financial crisis slowing global growth.
The consensus forecasts for economic growth this year have fallen in line with short-term confidence. The International Monetary Fund (IMF) is predicting that China's GDP growth will slow to about 5-6 percent, down from almost 12 percent in 2007. And most CEOs around the world are now planning for a slow recovery as opposed to a "v-shaped" downturn.
In every country except Korea and India, CEOs are more confident about the prospects for the next three years than the next 12 months. Even so, the overall percentage of CEOs who are very confident is still only 34 percent. Jorma Eloranta, President and CEO of Finland's Metso Corporation, the global supplier of sustainable technology and services, captures the essence well: "I am 57. If I look at the kind of uncertainty that I am now facing, I have never before seen such levels in my life."
|
