In its annual economic prediction for the coming year, IHS Global Insight says the U.S and world economies have emerged from recession, and the recovery process has begun. Unfortunately, for most developed economies, this recovery will not feel like one in its early stages. Strong tailwinds (policy stimulus, improved financial conditions, and pent-up demand) are being partially neutralized by equally strong headwinds (rising unemployment rates, lingering hangovers from housing bubbles and the financial crisis, and the likely winding down of fiscal stimulus). Consequently, global GDP will grow only 2.8 percent in 2010-much better than the 2.0 percent drop in 2009, but well below the 3.5 - 4.0 percent trend rate of growth for the world economy. Most emerging markets, particularly Asia, will outpace the developed economies next year. The U.S. economic recovery will begin the year slowly, but Europe and Japan will rebound even more slowly.
Here are the Top 10 predictions, in brief:
1. The U.S recovery will start slowly.
2. Europe and Japan will rebound even more slowly than the U.S.
3. Most emerging markets - especially in Asia - will outpace developed economies.
4. Interest rates in the G-8 economies will remain very low.
5. Fiscal stimulus will begin to ease.
6. Commodity prices will move sideways.
7. Inflation will (mostly) not be a problem.
8. After improving for a while, global imbalances will worsen again.
9. The dollar may strengthen a little, but it is on a downward glide path.
10. The risk of a "hard W" is still uncomfortably high.
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