The outlook for the global economy took a significant turn for the worse in the autumn of 2008.
The turbulence affecting the international financial system in the wake of the U.S. mortgage crisis reached new heights in October 2008. All around the world, governments and central banks were compelled to take concerted financial action on an unprecedented scale. At the beginning of fiscal 2008/2009, it is as yet unclear how far these measures will help to mitigate the effects of the financial markets crisis. Likewise, the extent to which the crisis will affect the real economy cannot yet be evaluated with any certainty. It remains to be seen, therefore, whether the forecasts available in November will need to be adjusted further downwards.
The International Monetary Fund (IMF) expects the global economy to weaken significantly in 2009, with global growth at 2.2%. In their “Joint Economic Forecast Autumn 2008,” leading economic research institutes (Joint Economic Forecast Project Group) revised downwards the forecasts, taking a more unfavorable view of the global economy. They anticipate a relatively long period of weakness in the global economy and believe there is a risk of recession in many industrialized countries, with slower growth, too, in the emerging countries. Overall, the Project Group anticipates an increase in global production of just 1.8% in 2009.
According to the Project Group, real GDP in Germany is likely to increase by as little as 0.2% in 2009, compared to the 1.8% it still expects for 2008. The forecast therefore sees Germany on the edge of recession. In a risk scenario it even expects a fall of real GDP by 0.8%. Some economic researchers are even of the opinion that Germanys economy is already in recession.
For Europe, which it expects to grow by around 1.0% in 2008, the Project Group believes 2009 will be a year of stagnation. According to the forecast, there are many indicators that suggest Europe is heading for a recession.
According to the report “World Economy in Autumn 2008” of the IfW, the previously booming economies of Asia are likely to continue expanding at a high level in 2009 (6.7%), albeit at a slightly slower rate than in 2008 (7.6%).
The IMF expects the GDP in the USA diminish by 0.7% in 2009, the lowest figure for the last ten years, as a result of weaker demand from private consumers and a drop in corporate investment. With regard to 2008, the IMF forecasts growth of 1.4% in the U.S. economy.
