Following six years of continuous growth, Europe and the USA will start 2009 in recession. In Asia, growth will slow significantly. Thus, the financial crisis is having a massive influence on the real economy. Analysts disagree as to how long the recession will last and how deep it will become. However, they are in agreement that this will be the most severe slump since the Great Depression of 1929. The International Monetary Fund (IMF) forecasts that the global economy will grow by just 0.5% in 2009 and a noticeable upturn will first materialize in 2010 – with growth of 3.0% then.
Global Recession in 2009
The new American administration under President Barack Obama has started to counter the recession with a stimulus package of some $800 billion. The package is aimed at infrastructure expansion and the health and education sectors. Consumer spending, the key pillar of the US economy, is weakening. Many households are heavily in debt and property values are declining. The unemployment rate is the highest in 14 years. According to many economic experts, the US economy is in a structural crisis that will usher in years of below-average growth rates. According to IMF estimates, the US economy will decline 1.6% in 2009 and rise 1.6% in 2010.
Although Asia will not enter into recession, growth there will slow significantly. The Asian Development Bank (ADB) sees inflationary dangers in the region despite weaker growth. The ADB forecasts growth of 5.8% in 2009. In China, the ADB expects a rise of 8.2%. The Chinese government is supporting growth via a US$600 billion stimulus program. The money is intended to flow into housing, infrastructure and environmental projects. As with the USA and Europe, Japan will not escape recession. According to the IMF, the Japanese economy will decline 2.6% in 2009 and rise 0.6% in 2010.
As in the USA, Europe will enter recession in 2009. The IMF is forecasting a decline of 2.0% there. However, the economy is expected to grow 0.2% in 2010. The IMF foresees no growth for Germany in 2009 either, with GDP declining 2.5%. The forecast is reinforced by a strong drop in new orders for German industry. On the other hand, inflation is set to weaken substantially compared to 2008. For 2010, the IMF is expecting GDP growth of 0.1% due to government and central-bank financial aid.