Global Economic Prospects: How bad will things get?
Thursday 27th March, 2008
16:00 GMT / 12:00 EDT
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The first months of 2008 have seen the financial sector crisis spread deeper into the real economy, particularly in the United States. Declining property values, poor service sector data, rising inflation and a weakening dollar, among other economic indicators, point to increased risk of a US recession. High inflation has become a global concern, while general economic slowdown has raised the spectre of a return to ‘stagflation’. Investors moving away from volatile and risky equities markets have led to record high prices for both hard and soft commodities worldwide. These and other negative factors appear to be converging, increasing uncertainty about prospects for global economic growth.
This raises a number of key questions:
- Will the United States enter technical recession? What are its recovery prospects in the medium-term?
- If the US goes into recession, is the hard commodities boom sustainable or will metals fall?
- Will hard and soft commodities fare differently, particularly with soft commodities on the rise?
- Can faltering European and US demand be compensated by Asian demand? How far will the slowdown in advanced economies affect leading emerging economies, such as China and India?
- Will inflation remain high, leading to stagflation? What, if anything, can central banks and governments do?
- In the financial sector, where might we find the next major crisis after the monolines? A major bank?
- Can the sovereign wealth funds take up the slack, and what are the implications?
- Will the WTO Doha round fail, or can a new US administration revive it? What does this imply for trade liberalisation, and prospects for a return to protectionism?
- Will a reformed IMF emerge, and will it be able to help economies in difficulty?
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