CIAO DATE: 11/2009
March 2009
There is now little doubt that the global economy is set for its worst year since the end of WWII, with world GDP forecast to fall more than 2% in 2009. Significant uncertainties nevertheless remain about how deep and protracted the recession will be. Weakness in house and equity prices could drag on for some time, unemployment is rising fast, and the financial sector remains in a dysfunctional state. The process of corporate and household retrenchment already under way is likely to continue for some time. Taylor rule analysis suggests short-term interest rates need to be negative, supporting the shift toward 'quantitative easing' now under way. Eventually this and other stimuli will produce a strong recovery - but not until 2011.
Resource link: How far away is a global recovery? [PDF] - 175K