The Global Economy in Turbulent Times

CHAPTER 5 TW3 2009: Growing Again, but Hold on Tight¹

One thing is certain about 2009—it will change 2010.

I just returned from an extended trip to the United States, Japan, the Pearl delta, and Hong Kong. I sense increasingly encouraging signs that the world economy is in recovery. Rebound is, however, uneven. The latest Organisation for Economic Co-operation and Development (OECD) indicators point to stronger than previously expected growth of activity in France, Italy, Australia, and the United Kingdom. Tentative signals of expansion have emerged in Canada and Germany. Clearer signs of revival have become more visible in the United States and Japan, and in most other OECD nations. But the main driver is not the OECD. The combined output of its 30 developed members is expected to grow by about 2 percent in 2010 and in the region of 2.5–3 percent in 2011. That’s poor recovery; it’s not very encouraging. Outside, China is forecast to expand by 9–10 percent in 2010, and more of the same in 2011. Some say even higher. Activity in India and Indonesia is rather robust. Brazil and Russia have a way to go. Indeed, both the World Bank and the International Monetary Fund (IMF) have just raised their forecasts for East Asia: gross domestic product (GDP) growth of 6–7 percent in 2009 (up from 5½ percent) and accelerating to 7.5–8 percent in 2010. China’s rapid growth is not just pulling the region along; it is acting like the world’s locomotive. Nevertheless, governments remain cautious ...