The dark storm clouds are moving away, barometers are rising and patches of blue are breaking through. So has the good weather arrived? The most serious moments of the worst recession in decades are now behind the international economy. A phase in which catastrophe was almost upon us and we were forced to take measures that had been unthinkable just a short time before. Now economic indicators are already hinting at the end of the worldwide economic crisis but coming out of such a situation is still a risky business.
The storm may have passed but the terrain ahead is still complex. The outlook for the main countries, both developed and emerging, is growth in 2010 but with some exceptions. The starting point for emerging countries is somewhat more solid, as they suffered a less spectacular tumble in 2009. Developed economies are starting to benefit from the flows of international trade re-establishing themselves at the same time as consumer «shock» is starting to ease up. Firms are beginning to believe that 2010 is going to be better and are once again considering the possibility of undertaking some investment.
But in addition to the encouraging figures there are also some worrying elements. The most notable is high unemployment, a burden for any recovery that must be based at least on domestic demand. In spite of the inklings of recovery, the ranks of the unemployed are still swelling, although this should stabilize in 2010. However, within the normal cyclical movement of an economy, unemployment is a deferred phenomenon, i.e. it doesn't improve until recovery is well underway.
The most delicate issue revolves around the aid provided by economic and monetary policies that have helped to slow up economic decline; stimuli that make this incipient recovery precarious in nature, insofar as their premature withdrawal might lead to a relapse in the recession, while if they are maintained they could destabilize public accounts and encourage a new liquidity bubble. Some central banks have already started to raise their reference interest rates from the record minimums, something that should become more widespread in 2010, as well as withdrawing exceptional measures to inject liquidity. In general, governments are maintaining measures to stimulate business but, in 2010, they will have to spell out just how these will be withdrawn, as their effect in terms of deficit and debt makes them unviable for much longer.
The financial sector does not seem overly concerned about the deleveraging of families and firms nor about the deterioration in public accounts. Its recovery as from the second quarter of 2009 anticipated the improvement in real activity by several months, but the powerful rise in stock market indices has not managed to match up with the figures for gross domestic product. In fact, credit is still not flowing readily to the private sector, while episodes such as Dubai World and Greece warn of the risks that still exist in the bond market.
In short, the recovery is still fragile due to dependence on government stimuli and the still incomplete restoration of balances in the private sector, firms and families. Growth figures are positive again thanks to them being compared with the worst points in the recession but a return to pre-crisis levels of income and wealth will take a long time. The outlook is clear but our eyes are still drawn to the sky with some trepidation.
