Recovery slow

INDICATORS suggest that the rate of contraction in world GDP eased in the June quarter, as household spending stabilised and the rate of stock clearance slowed.
According to the Export Finance and Insurance Corporation (EFIC) World Risk Developments, recovery will be slow.

EFIC senior economist Dougal Crawford, says the level of global GDP is not predicted to return to 2008 levels until 2011.
“While world GDP continued to slump in the March quarter due mainly to large falls in the advanced economies, India, China and Indonesia all recorded positive growth which is encouraging,” says Crawford.
Other positive signs include an increase in commodities prices and the return to life of the emerging market bond and equity markets, amid increasing risk appetite and signs of economic stabilisation.

“Spreads on emerging market sovereign bonds have declined sharply, and after virtually disappearing in late 2008 debt issuance has risen strongly,” says Crawford.
“The Philippines, Turkey, Indonesia, Mexico, Poland, Brazil and China have all successfully raised funds.
Over the year to date, emerging market sovereigns have issued US$50 billion worth of bonds, broadly in line with pre-crisis rates.”

This latest EFIC review of the world economy also highlights the implications for economic liberalisation and fiscal consolidation in India following the strong Congress Party showing in last month’s general election and the prospects for stability in Sri Lanka following the defeat of the Tamil Tigers.

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