This week we released our new forecasts for the world economy in Global Scenarios. We have revised down growth rates quite substantially for 2009. However, the severity of the downturn has led to a marked increase in growth packages globally. We therefore still see some light at the end of the tunnel and expect US and Asia to recover during the year.
Our expectation of improvement from Q2 09 is based on the combination of substantial inventory drawdowns in Q4 and Q1 combined with massive stimulus from fiscal policy, monetary policy and lower commodity prices. The credit crisis will continue to weigh on growth but the shock effect from late 2008 will taper off slowly.
In fact we are already starting to see signs that the worst will soon be behind us in terms of production decline. In China the PMI survey has rebounded quite strongly and high lending growth is signalling a pick-up in investment spending. Exports in South Korea and Taiwan have also rebounded giving some further support to the case for improvement in Asia. Just this past week we had a positive surprise on US retail sales for February. Core sales rose for the second month in a row after having declined every month from July to November. We believe the improvement is due to a delayed effect from the massive stimulus from lower energy prices and that the shock after the Lehman collapse is starting to be absorbed better.
In Euroland industrial production data and orders for Germany continued in steep decline this week which points to another very weak quarter in the beginning of 2009. The data flows confirm our expectation that US and Asia will be first to get out the recession while Eu-roland and Central and Eastern Europe will be lagging.
