The Global Economy in 2009
Richard Urwin, Head of Asset Allocation & Economics in the BlackRock Multi-Asset Portfolio Strategies Team, assesses the prospects for the global economy in 2009
As 2008 draws to a close, corporate treasurers and CFOs may be forgiven for looking at 2009 with some trepidation. Financial markets still face extreme levels of volatility, the financial system remains under severe pressure and we continue to see leveraged investors being forced to sell assets. On the wider economic front, the secular market dislocation we have just witnessed has lead to a real dearth of credit for companies and a severe economic downturn. It is no exaggeration to say that demand collapsed during the third quarter of 2008. Some companies have reported unprecedented negative operating conditions. The sudden deterioration in a range of key economic indicators tells a similar story.
And the good news? Precious little, except that the inflation concerns evident in the middle of 2008 have now disappeared, although concerns over deflation – which have remained in abeyance for five years or so – have begun to re-emerge.
So will 2009 bring more of the same or are we getting closer to the point of maximum pain for the global financial system and the wider economy, albeit with a long healing process ahead?