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Current Wolrd economic situation

It is more or less becoming clear that the worst is over in the world economic debacle and all over the globe countries are trying their level best to get their thoughts together to see how well the recouping is done. Of course there would be a serious concern of the varied pace in which the individuals would perform and limp back to normalcy.

Those countries which have a solid economic base would not have seen the worst of the situation internally despite the big players and their financial institutes, companies toppling and announcing bankruptcies over night.

In fact the downfall in the world economic situation in the World Economic situation report (WESP) predicted that the worst of the times should have been the year 2009.

According to the baseline scenario of the report, world income per capita will decline in 2009, for the first time since the days of the Great Depression. But given the great uncertainty prevailing today, a more pessimistic scenario is quite possible. If the present credit squeeze prolongs and confidence in the financial sector is not restored in the coming months, the report warns, the developed countries could enter into a deep recession in 2009.

The report analyzes in detail the evolution of the global financial crisis during 2008 and the more fundamental factors that led to its build up. It further assesses the impact on global economic activity, especially in developing countries, spelling out the channels through which the woes in the United States and Europe are being transmitted to the rest of the world.

The report recommends more forceful fiscal policy stimuli need to be taken in an internationally concerted manner in order to prevent the world economy from falling into a much deeper and more prolonged recession. It also further details a number of more fundamental reforms to the international financial system that are needed to reduce risks of a recurrence of such a devastating crisis in the future.

However extending this in a broader scale it can also be told that The negative influence of the Asian financial crisis has kept on easing up, the international financial environment has turned for better and the economic growth in the United States is still fairly strong. The prospect of the world economy on the whole is better than last year. But the unbalanced development is still pregnant with grim possibilities, the disparity between the North and the South has further widened and there are still many unstable [url removed, login to view] growth rate of the economy in Latin America has dropped apparently which needs a process of rally and resurgence. The launching of Eurodollar is helpful to the optimization and readjustment of the industrial structure inside the European Union and the momentum of the economic development is expected to recover step by step.

US economy has slightly different problems being addressed. We expect to see insolvencies continue to rise into 2009. Business bankruptcies (including liquidations) have risen 40% in the past four quarters compared to the previous four. Business conditions have been difficult for several quarters, resulting in cumulative operating losses which are pushing an increasing number of firms toward bankruptcy. One leading indicator of future business bankruptcies is the Federal Reserve’s quarterly survey of bank lending officers. The most recent survey showed a record high percentage of bankers widening spreads and tightening lending conditions on C&I loans, a likely harbinger of increasing bankruptcies.

Current economic conditions are decidedly negative and one expect them to remain so into 2009. Both retail sales and wages are shrinking on a real, year-over-year basis, home foreclosures and delinquencies are at record highs, housing prices continue to plummet, and job losses and unemployment are on the rise. Unfortunately several of the forces which caused the U.S. to go into this slowdown are still in place: high energy prices, an imploding housing market, and tight credit conditions, so we expect the business environment to remain negative for several quarters. On the positive side, housing affordability is skyrocketing, and house prices may have reached a “fair value.” Also, the Fed’s aggressive loosening of monetary policy in 2007 and 2008 is quite likely to lift the economy out of this downturn in 2009.

Countries which are note worthy are China and India, who despite the good chits for steady growth in the recent path has also suffered to some degree. However it is far understood that their economies and the magnitude itself is a huge size that would keep world fund managers wonder how much it effects the mega and micro operations of the [url removed, login to view] the respective government's do is to inject stimulatory funds from time to time and see that there is a good back up.

Since the beginning of this year, though its economy has been under the serious lagging influence of the regional financial and economic crisis, China, India and many Asian countries has persisted in implementing a stable exchange rate policy and, by adopting proactive financial and monetary policies, has spared no effort to boost domestic demand and maintain the momentum of economic development, thus continuing to make positive contributions to the recovery of the regional economy. We have all along adopted an active and enterprising attitude to participate in the economic cooperation with neighboring countries and in the world. It is good to note that developing countries is facing a much comfortable situation and the fact that the worst is over has been announced in many publication and channels across.

On the whole, there are still many uncertainties, but opportunities and risks exist simultaneously. One hope that the principal developed countries will adopt a responsible attitude to restrain the speculative factors of international capital, and at the same time, take practical actions as soon as possible to truly alleviate the debt burdens for poor countries and improve the external environment of developing countries for the economic development. This will be beneficial to the long-term prosperity of the economies of developed countries.

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