The world economy was hit by a series of massive shocks in 2008. Alongside the real estate crisis came the oil price shock up to mid-year and then, in September, the dramatic escalation of the financial market crisis. All this combined to send the economy into a tailspin in 2008. In the fourth quarter of 2008 alone gross domestic product in some industrial countries tumbled by one to two percent. Without doubt, we are in the steepest economic downturn since World War II.
No global depression
Key indicators are not yet flagging any improvement. Nonetheless, a gradual stabilization in the course of 2009 is more likely than an unbroken steep decline. Taken together, the sumptuous stimulus packages around the globe totaling 1,500 to 2,000 billion US dollars (three to four percent of global output), the monetary loosening by the major central banks and the sharp drop in the oil price are probably the largest economic stimulus for many a decade and point to an economic recovery. In the medium and long term, however, the consequences of the financial and economic crisis will hold back global momentum. "We are currently in the middle of a sharp recession. But there are forces at work which will trigger a turnaround: Above all, declining oil and energy prices, low interest rates and the stimulus packages will spark an economic recovery. But in the medium term, starting in 2010, the world economy will see only moderate expansion," said Michael Heise, Chief Economist of Allianz SE.
Michael Heise: "Above all, declining oil and energy prices, low interest rates and the stimulus packages will spark an economic recovery"
In the medium and long term the following factors in particular will weigh on economic growth: The stimulus packages and the losses in government revenue wrought by the recession will result in the need for consolidation which will drag on for years and curb domestic demand. Going forward, tighter financial market regulation and decreased risk appetite among investors will limit the availability of venture capital. The drop in demand in over-indebted countries will not be able to be offset by higher demand in countries with high savings. A positive element in this context is that global imbalances will decline.
All told, up to 2015 the economists at Allianz expect economic growth in the industrial countries to be on the moderate side and fairly solid in the emerging markets. The latter are still engaged in a catch-up process. Emerging markets with large current account surpluses or high private sector savings ratios are in a position to boost domestic demand. They have the means to resolve the crisis and are not as badly affected by the capital market crisis as the industrial countries. The emerging market share in global output will rise from around 30 percent in 2008 to over 38 percent in 2015. The Asian contribution will rise particularly sharply, up from 14.5 percent to a good 18 percent.
1Percentage change over previous year
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