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Wednesday, January 27, 2010

RSG World Economic Brief - January 2010 by Dr. Douglas O. Walker

At the start of a new year the RSG World Economic Brief takes stock of the world economic situation and the prospects for main world regions in 2010.

Here are some highlights from the outlook for 2010:
  • Across the globe, many countries are beginning to recover from the recession. Nonetheless, unemployment remains high in most countries, the world financial situation remains unsettled, international trade and capital flows remain weak, and the potential for inflation in key international prices for commodities such as oil and food remains in place.
  • The United Nations reports the more developed countries of Europe, North America and Japan and Oceania are experiencing a turnaround after a sharp fall in their production, trade and employment in late 2008 and 2009. It would appear the situation in these countries in 2010 with regard to industrial production, employment, asset prices and credit availability will improve somewhat over recent conditions. It is expected, however, that their recovery will be weak because households and businesses remain in financial distress and are likely to spend much of their incomes getting out of debt.
  • Growth in Russia, Eastern Europe and Central is forecast to be low in 2010 with unemployment continuing to rise. Many of these countries have experienced a sharp drop in international bank lending and face domestic economic challenges.
  • Developing countries in Asia continue to record strong trade with the rest of the world and buoyant domestic growth, with China's economy forecast to expand at a rate of almost 9 per cent in 2010 and India's economy at 6 ½ per cent. Similarly, growth in Western Asia, Sub-Saharan Africa and Latin America and the Caribbean are expected to recover significantly in 2010 but the economic prospects of these countries are strongly dependent on more rapid international trade, higher commodity prices, and greater flows of capital from abroad.
The global downturn of 2008 and 2009 was the only contraction in the level of world economic activity since the Second World War. It was deep, widespread and pervasive in its effects. Any recovery is going to be slow and prolonged and the recession will inevitably leave a legacy of lingering problems in its wake.

This month's Brief provides some idea of the economic developments now taking place across the world and the prospects of main world regions for this year. Signs of improvement can be seen but it is important to keep in mind that the situation remains difficult everywhere, especially in terms of unemployment and extensive areas of abject poverty that describe the world's poorest countries. And, finally, it should not be forgotten that the current revival is weak and uncertain and a reversal of present progress cannot be ruled out.

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