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Global Recession in 2009

This Outlook presents the IMF forecast for the global economy which is expected to continue growing in 2008 despite recent turmoil in the credit markets.


The invisible had ruled in 2008. Will Wall Street or Washington set the pace for the economy and markets in 2009?

After two decades of Milton Freedman, will the next phase of economic policies be dominated by Maynard Keynes?

IMF Gloomy Global Economic Outlook

In advanced economies, the drop in consumer demand and business confidence is expected to continue to drop during the first two quarters of 2009.

In emerging economies, there is likely to be a continuation of deleveraging and asset sales, capital flow reversals, sharp widening of spreads on sovereign and corporate debt, and further abrupt currency depreciations.

Based on current policies, the world economy is projected to slow down to a 2¼ percent growth rate in 2009, down from about 5 percent in 2007. The major advanced economies that are already in recession are expected to contract by ¼ percent on an annual basis in 2009 for the first time in the post-war period.

While growth in the emerging economies is still projected to be around 5 percent in 2009, many will face very difficult times as they adjust to a deteriorating global environment.

Even this newly reduced forecast cannot be taken for granted. The downside risks remain significant especially if the hoped-for stabilization of financial conditions and increased policy support is slower at having an impact than expected.

On the positive side, headline inflation is receding rapidly across advanced and most emerging economies.

Ups and Down Market Risks

Events took markets by surprise in 2008.

Yet the outlook for 2009 may be easier to predict because several conditions seem certain certain:

 

  • consumers with wait and watch to see what happens to their jobs;
  • investors will be will shy away from risky and complicated deal; and
  • governments will flex their muscles

 

What goes up always comes down. And when markets come down they eventually also go back up.



The question for 2009 is therefore not if, but when and by how much, markets will recover.

Several factors could affect the when and by how much.

The level of unemployment and jobs that will be lost or created will have the strongest impact on consumer demand. But markets and the government will influence this equation.

Restoring consumer demand is the first priority in setting the economic engine on the path towards recovery.

Reestablishing confidence in the financial market and access to credit is therefore a crucial first step already taken in 2008.

Governments have already stepped in with a range of financial “bail-out” packages in the US, Europe and Asia. The World Bank has pledged to increase lending to emerging market economies from around US$20 to 100 billion.

This may slow down or stop the hemorrhage but does not fundamentally change prospects for the future.

The Federal Reserve and central banks elsewhere have stepped in to bring down and control long term interest.

Many governments including the new Obama Administration are planning ambitious Keynesian-style economic stimulus programs.

Some of these programs will impact on the healthcare industry in important ways.

Contact details

Alexander S. Preker

President/CEO
Health Investment & Financing
14 Wall Street, 20th Floor
New York, NY
10005
United States of America

Office: 1 (212) 348-1866
Cell: 1 (202) 667-8286
Fax: 1 (212) 348-2866
Email: apreker@healthinvestment.com
web: http://hifcorporation.com/bio/10



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  January 01, 2009  


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