As the U.S. remains the epicenter of the global economic crisis, a shell-shocked world begins a new year with a somber outlook, according to a new report from MAPI.
In the MAPI Quarterly Forecast of U.S. Exports, Global Growth, and the Dollar: First Quarter 2009 Through Fourth Quarter 2009, economist Cliff Waldman writes that data and forecasts through the end of 2008 reveal the bleakest global outlook in the post World War II era.
The depth of the U.S. economic downturn and financial disruptions which have spread globally have created a nearly synchronized slump in industrialized country output, Waldman said. "In addition, recent data reveal an eroding picture for the emerging world, in sharp contrast to the mixed prospects that were expected just a few months ago. And, alarmingly, for the critical Asian region, and for global prospects as a whole, there is potential for a sharp slowdown in the Chinese economy."
MAPI expects the growth of total U.S. goods and services export demand to slow from an estimated 8.4% in 2008 to 0.9% in 2009. The latter is significantly below the previous quarterly forecast of 7.3% for 2009.
Gross domestic product (GDP) growth in non-U.S. industrialized countries, which include Canada, the Eurozone (plus Denmark, the United Kingdom, and Sweden), and Japan, is expected to contract by 0.7% during the fourth quarter of 2008. MAPI forecasts a decline of 1.3% during the first quarter of 2009 and a further decline of 0.8% during the second quarter of 2009. It subsequently expects flat growth during the third quarter of 2009 before the beginning of a modest recovery during fourth quarter of 2009, with expectations for 1.7% growth.
Aggregate developing country growth is expected to be softer than previously forecast, due in part to weaker prospects for China and Brazil. MAPI estimates developing country growth at 3% during fourth quarter 2008, 2% during the first quarter of 2009, and 1.7% during the second quarter of 2009. Expectations are for further deceleration to 1.5% during the third and fourth quarters of 2009.
"While a number of forecasters have, with trepidation, suggested that a measure of economic and financial stability might return to the U.S. and global economies sometime during the second half of 2009," Waldman said, "visibility is thwarted by the strength of current downward forces."
The report states that mirroring the sentiments and trends of a crisis-ravaged world economy, normally volatile currency and commodity markets have been especially unpredictable in recent months.
"A return to something approximating normal activity in these markets will be among the first signs of an imminent stabilization in the widening global recession," Waldman writes.
MAPI's current dollar forecast envisions dollar appreciation through the second quarter of 2009 against both the currencies of the industrial and developing countries. The report predicts a flat performance during the third and fourth quarters of 2009 against industrial country currencies and a flat performance during the third quarter of 2009, followed by a 7% decline during the fourth quarter of 2009 against developing country currencies.
"The rare financial nature of this global event makes it difficult to fully assess the impact and the timing of what has been very strong policy stimulus in the U.S. and around the world," Waldman added.