Economic Views

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The recovery from the worst recession since the great depression has been slow and jumpy in the developed world. Recessions triggered by financial crises typically take longer to bounce back from and the recession of 2008-09 is no exception. Two years after the nadir of the recession, the world’s largest economy, the US, is still spluttering along, the eurozone is trying to avert a sovereign debt crisis and Japan has lapsed back into recession after a devastating natural disaster.

The slowdown in some key developed markets and the tightening of monetary policy in emerging markets has impacted negatively on global trade and industrial production volumes. We expect this is evidence of a temporary blip and not a permanent dip – volumes will recover, but with an ever increasing focus on emerging markets as customers and not just producers. Tensions over currencies have been off the front pages in the first half of 2011, but there is potential for another flare up in the near term, as the underlying causes of the contention have yet to be resolved.

The world economy is set to slow down in 2011, as government and central bank policies are tightened and key developed markets go through a deleveraging process. The following year should see global growth bounce back, as trade rebounds, consumer spending picks up and the economic uncertainty surrounding current events such as US debt negotiations, the Greek debt crisis, and the Japanese earthquake and Arab spring subsides.