Next six months will be critical, says economist
This year will be “make or break” for the global economy as it becomes apparent whether the recovery is sustainable, according to a new report from Northern Bank.
In its Global Scenarios report the bank said it found “grounds for cautious optimism” with forecasts for the world economy to grow at 4.2%.
But it adds that it is not yet clear how strong the risk is of a ‘double dip’ scenario where major economies would slip back into recession.
Northern Bank Chief Economist Angela McGowan said the interdependence of worldwide economies now means that any changes to current global recovery prospects would also have reverberations in Northern Ireland.
“While the local economy is set to grow at 1.3% in 2010, a global recovery will clearly have an influence on the local outcome. The European Union, including the Republic of Ireland, currently accounts for the largest share of local manufacturing exports and therefore any European recovery will benefit the local economy.
“While the depreciated pound provides some support to local exporters the private sector and local policy makers should now be focusing on increasing our exposure to growing demand in Asia and US markets. Expansion |into new export markets will not only support economic growth but will also minimise long-term risk when future downturns inevitably occur.”
Ms McGowan said that the global recovery had continued broadly on track over the past three to six months but that it is too early to celebrate.
“The next six months will be critical as we wait to see if Western economies manage to translate the massive stimulus and inventory correction initiatives into job growth and sustained recovery. Even with growth, risks |remain. In particular, the financial system is still damaged and |high levels of debt are lingering. This phase of recovery is particularly critical as governments have little ammunition left with which to fight economic problems,” she said.
The report forecasts growth for the world’s largest economies including China which is set to grow at 9.5% followed by the US at 3.2%, Japan at 2.7% and Euroland at 1.8%.
Ms McGowan added that the return of US job growth would be a key factor in the stability of the recovery.