It is also natural that people expect these meetings to produce decisions, measures and policies that would give them hope for recovery. But is there any progress? Is there any small sign of change, improvement or economic tension relief? Opinions differ on that. Let us look at both sceptical and optimistic views here, and draw our own conclusions.
A French centre for the global economic situation research admitted after analysing the recent developments: “No matter how hard we try, we still cannot see the end of this gloomy tunnel… Anyway, what is meant by a turning point? If we refer to a point where unemployment in Europe, already close to 10% of economically active population, stops rising, that is unlikely to happen before the second half of 2010.” The Bank of America’s economic sector has assumed a moderate position, saying that positive changes can be expected to begin in the United States and then spread across the world, in the last months of this year. However, they failed to support their opinion by any solid reasoning.
Meanwhile, the International Monetary Fund (IMF) has already made several forecasts about the global economic recovery, every time moving the expected revival to a later date. IMF chief Dominique Strauss-Kahn said at a Montreal forum in early June the “most credible scenario” was that the recovery would take place in the first half of 2010 with the turning point in September or October.
However, “the path to global economic recovery is rife with risks,” the IMF and the World Bank said in their forecast.
Strauss-Kahn warned that the biggest risk to his outlook was countries taking too long to cleanse toxic assets from their banking systems. “You never recover until the cleansing of the balance sheet of the financial sector has been completed,” he said.
Other scenarios are more optimistic. President of the European Central Bank Jean-Claude Trichet expressed cautious optimism about when this global disaster would be over. “We are, as far as growth is concerned, around the inflection point in the (economic) cycle,” he said last month.
“In all cases, we see a slowing down of the decrease of GDP (Gross Domestic Product) that has been observed in the last quarter of last year and the first quarter of this year… In certain cases you see already a picking up, in other cases you see it continuing to fall but at a lower pace,” he added.
Trichet pointed to some “encouraging” news in the banking sector but stressed that it was “no time for complacency.” Meanwhile, as the economy reaches the turning point, central banks and governments should now pay attention to “exit strategies” that would allow them to return to a “sound and sustainable situation,” Trichet said.
This means that the fiscal policy should be well balanced and should take into account government interests and those of crisishit businesses. He also said that, although the situation was still tight, it was still better than in September 2008, and that the world economy, although still undergoing a severe downturn, had “a prospect of gradual recovery over the course of 2010.” US President Barack Obama, who inherited a heap of financial and economic problems from George W. Bush, has implemented a series of widely popularised stimulus and bailout polices.
Therefore, he is now making encouraging statements.
Expecting a revival as early as next year, Obama has announced with satisfaction that the US property market was stabilising, and cited signs of rehabilitation in the country’s banking sector, including a revival of lending. The $1 trillion allocated to the financial sector as a bailout must have produced the desired effect, which gives the country’s government reason for such optimism.
Russian President Dmitry Medvedev is also cautiously optimistic.
He said when opening the country's top business forum in St Petersburg that the global economy had avoided the worst, but warned participants it was too early to celebrate recovery.
“I think it is still too early to be getting out the champagne,” Medvedev said in his opening remarks. “It’s not for nothing that some economists have called the financial crisis a long-running and very resistant ailment,” he said giving his outlook of the global situation.
Medvedev also emphasised the need for combined efforts to achieve a recovery – information exchange and better-coordinated actions. Moving one step ahead of many others, the Russian president is focusing on the need to learn the lesson and prevent more crises in the future. The existing methods of regulating financial markets and institutions are obsolete, he said, and should therefore be replaced by “new regulation standards.” “We need to find a road between the two extremes of leaving the existing system untouched and sharply increasing the role of regulation.
If countries go for the first option, leaving the current system unchanged, we would ultimately end up on a road taking us straight towards a new crisis,” he said.
Finally, the Russian president came up with the following concept: “We do not need huge swathes of new international rules. What we need are some effective and transparent rules that create incentives for everyone to act rationally.” The Russian economy was in fact badly hit by a financial turmoil that spread to Europe from overseas. Russia is Europe’s closest neighbour, an old trade partner and energy supplier.
It needs to be said for the sake of objectivity that the European financial meltdown has had such serious repercussions in Russia because it has become an active participant of global economic processes, with all its benefits and – in this case – negative consequences.
Therefore, things will get better and growth will resume in Russia along with Europe’s recovery. This is a logical effect of their economies’ interconnection.
