Economic outlook

The brightening economic outlook in the last months of 2009 – especially in private demand – could help the world economy to recover in 2010. The situation in the financial sector, where challenges and uncertainty still persist, remains critical.

The current recovery of the world economy is driven by the positive momentum in many emerging countries. Industrial countries are also expected to recover in 2010. However, this improvement will probably be modest since some of the positive stimulus currently emanating from the government economic programs should decline. The decisive factor will therefore be whether the emerging economies can step up their role as growth drivers. This appears unlikely at present, however. The world economy is expected to grow by 4.1 % in 2010.

The outlook for inflation in the coming years should continue to stabilize in 2010 and 2011. Experts reckon with global inflation of 3.1 % and 2.9 % in 2010 and 2011, respectively, so there is no acute inflation threat in the mid term despite the monetary expansion. Moreover, because of political pressure, central banks are likely to raise rates only gradually in the coming years.


A moderate recovery is expected in the Eurozone in 2010. The expansion of government economic programs should continue to provide support in the coming year. Very low short-term interest rates in the Eurozone and reviving export demand will also have an expansionary effect. However, all in all, factors suggesting only modest economic development predominate: firstly, the situation on the labor market is expected to worsen. Secondly, the real estate markets in many countries are still having a dampening effect because real estate prices could stagnate or fall. Thirdly, most countries in Eastern Europe have been hit even harder by the crisis than Western Europe. Fourthly, in Europe the real economy, which is more dependent on bank funding than in other economic regions, is overshadowed by the adjustments still hidden in many financial institutions’ balance sheets. Fifthly, at the beginning of the year 2010, the high deficit of some countries in the Eurozone, e. g. Greece, came into the focus of investors and the risk of a potential national bankruptcy increased. The resulting uncertainty can have negative consequences for the economic growth of the entire Eurozone. A continued weakening of the euro could have, however, positive effects, especially for the highly export-linked countries of the Eurozone. GDP growth is expected to be positive at 1.5 % for the Eurozone.

The outlook for Germany’s economy will mainly depend on two factors: export dynamic and domestic economic effects. The key factors here will be the trend for the labor market and the availability of finance. A recovery is expected for Germany, with GDP growth of 2.1 %.


At the beginning of the year 2010, the economic situation in the United States showed increasing evidence of recovery. Capacity utilization improved and is expected to positively influence the labor market. Improvements in inventories and capital spending are further signs of economic recovery. If the growth prospects continue in the United States, also investor concerns about the sustainability and durability of economic growth should dissipate.

The current economic recovery, however, remains at risk. The fiscal stimulus initiated in the year 2009 will significantly weaken in 2010. Although the real estate market is starting to bottom out, no significant stimulus can be expected as yet from residential construction given the market’s continued oversupply. Moreover, households should adjust their spending to the sharp increase in debt over the past years.

In these circumstances, growth of 3.8 % is expected in 2010.


It appears unlikely at present that the emerging economies in Asia can act as key growth drivers for the world economy in the short term. In 2007, the year before the crisis, private consumption in China was just one-eighth the US level. Moreover, a further rise in unemployment is expected in the Asian emerging economies in 2010 and investment activity will remain low as capacity utilization is well below pre-crisis levels in most countries. For Asia (excluding Japan) a GDP growth of 7.7 % is expected in 2010.

In Japan, the economic outlook for 2010 will depend very largely on the development of the international environment and foreign demand. GDP growth will probably be 1.7 %. A rigorous consolidation of public finances is necessary given the very high level of government debt.

GDP growth of 9.0 % is forecast for China in 2010. Rising inflation, the reduction of industrial overcapacity, and fiscal policy will be the key economic issues. The Chinese government’s public investment, which was stepped up strongly in 2009 to stimulate the economy, is likely to become less extensive in the year 2010.


Positive growth of 3.9 % is expected for the region in 2010, driven mainly by Brazil and Chile. Falling commodity prices are the biggest risk for these two countries. Experts currently predict stable commodity prices in 2010.

The economic outlook for Mexico will continue to be influenced largely by growth in the United States. GDP growth of 2.6 % is forecast for Mexico in 2010. For Brazil, GDP growth of 5.8 % is expected after a small decrease in 2009. In Argentina, GDP growth of 1.5 % is forecast after a sharp decline in 2009.

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