Global economic activity was largely subdued in 2009. This negative development is indicative of the adverse repercussions of the global financial crisis. As a consequence, the world’s real GDP, is estimated to have contracted by 1.1% in 2009, comparing unfavourably with a growth of 3.0% recorded in 2008.

This notwithstanding, most countries including advanced economies are beginning to exhibit some nascent recovery signs. Expansion in global economic activity has been underpinned by strong public policies and deliberate policy measures taken by the IMF, which have allayed concerns about systemic financial collapse and eliminated fears of a global depression, whilst helping to boost global demand. Against this background, the global economy is projected to grow by 3.1% in 2010, spurred mainly by export growth resulting from improved global aggregate demand, a rebound in financial market sentiment and risk appetite, increased capital by banks, and the reopening of wholesale funding markets. The global economic recovery will be led by emerging and developing economies which have successfully withstood the financial turmoil much better than expected, reflecting improved policy formulation and implementation frameworks.

United States of America
The US economy is estimated to have contracted by 2.8% in 2009 after registering a growth of 1.1% in 2008. This decline is a reflection of the severe recession emanating from the credit crisis, falling housing and equity prices, weak aggregate demand and loss of confidence. It is projected that the economy will register a modest growth of 1.1% expected in 2010 as authorities implement policies aimed at restoring the health of the core financial institutions.

WORLD ECONOMIC GROWTH

Euro Zone

Economic activity in much of advanced Europe began to contract well before the September 2008 financial crisis, owing mainly to rising oil prices. Against this background, real GDP is estimated to decline by more than 4% in the euro area in 2009 and grow marginally by 0.5% in 2010.

Asian Countries

The impact of the global crisis on economies in Asia has been surprisingly limited. This is because the region was not heavily exposed to US securitized assets. Improved macroeconomic fundamentals and relatively sound bank and corporate balance sheets provided some buffers to the financial sector. Growth projections for Asia have been marked down to varying degrees, in line with weaker global demand and tight external financial conditions. In the Association of Southeast Asian nations
(ASEAN) economic growth is expected to decline dramatically from more than 6% in 2007 to around 0% in 2009.

Japan
The Japanese economy is projected to contract by 6.3% in 2009, given its extreme openness and high dependence on external demand. In addition, the yen’s strength and tighter credit conditions more generally have added to the problems of the export sector.

China
Growth in China is expected to slow to about 6.5% in 2009, about half the 13% growth rate recorded during the pre-crisis era in 2007. Despite the subdued external demand, economic growth has been sustained by aggressive efforts to provide major fiscal stimulus and monetary easing, which are helping boost consumption and infrastructure investment.  In addition, the export sector is a relatively smaller share of the economy, particularly after factoring in its high import content.

India
 Economic growth is expected to decline sharply from more than 9% recorded in the pre-crisis era in 2007 to 4.5% in 2009. The slowdown is primarily a result of weaker investment, reflecting tighter global financing conditions and a turn in the domestic credit cycle.

Middle East
The steep decline in the price of oil is hitting the region hard. As external financing conditions have deteriorated and capital inflows reversed, many equity and property markets have suffered substantial losses. Despite supportive policies, growth is projected to slowdown from 6% in 2008 to
2.5% in 2009. The sharpest slowdown is expected in the United Arab Emirates (UAE), where the outflow of external funds which had entered the country on speculation of a currency revaluation was pronounced contributing to liquidity stress, a sizable fall in property and equity prices, and substantial pressure in the banking system.

Latin America
The global financial crisis spread quickly to Latin American and Caribbean markets after mid-
September 2008. Depressed external demand and low revenues from exports, tourism, and remittances, decline in commodity prices have had some negative impact in the region affecting Argentina, Brazil, Chile, Mexico, and Venezuela, which are among the world’s major exporters of primary products. Financial sector stress and deleveraging in advanced economies are raising borrowing costs and reducing capital inflows across Latin America and the Caribbean resulting in an economic slump.

Sub-Saharan Africa
The global financial crisis has not spared Africa, as external demand and commodity prices have plummeted and global credit conditions have tightened, thereby raising the cost of external borrowing and reducing capital inflows to the continent. As a result, growth is projected to decline from 5.3% in 2008 to 2.0% in 2009. The downturn is most pronounced in oil-exporting countries notably Angola, Equatorial Guinea and in key emerging and frontier markets such as Botswana, Mauritius, and South Africa. Similarly, commodity exporting countries such as Zimbabwe, Zambia, and DRC have been adversely affected by the global economic recession

By Kipson Gundani