IT is nice to use the word prophecy and not have to follow that up with the interminable “Nostradamus” after it.The first Consensus Economics forecasts since the events of September 11 have been prepared and released.
IT is nice to use the word prophecy and not have to follow that up with the interminable “Nostradamus” after it.
The first Consensus Economics forecasts since the events of September 11 have been prepared and released. Not surprisingly, prospects for growth around the world have been revised massively downward. For example, expected growth in the United States has been reduced from 1.6 per cent to 1.0 per cent this year. For the year 2002, the growth rate has been dropped from 2.7 per cent to 1.2 per cent. This is the single largest downward revision in a single month in the 10 years or so that these Consensus forecasts have been produced. This growth outlook encompasses a recession as conventionally defined as being two successive quarters of negative growth.
In terms of the broader world market, the prospects for growth have been slashed from 1.5 per cent this year to 1.2 per cent and from 2.5 per cent in 2002 to just 1.6 per cent. Interestingly, the inflation forecasts are unchanged this year at 2.1 per cent. Inflation prospects for 2002 have been reduced significantly, from 1.7 per cent to 1.4 per cent. This is no doubt in response to the significant decline in economic strength that year.
As indicated above, these are the first forecasts since the World Trade Center disaster. It is certainly true that these forecasts are in keeping with what we suggested would be the case just after September 11. We are certainly still in unchartered waters, however, we are now seeing the development of a recessionary environment all around the world.
Can we insulate ourselves from this here in Australia? No, we certainly can’t. Being such a commodity-based economy, we are going to feel the impact of these worldwide declines. Our commodities are no longer going to be sought by the world market.
So what can we look forward to over the next 12 months? Our GDP is forecast to grow at 2.5 per cent. This forecast has not been revised yet, to account for the WTC attacks. If we were able to sustain this we would be doing very well.
However, it must be said that it is highly likely to be revised downward soon. The reduced economic growth will have its own effects in other areas. Despite the unemployment figures released recently, surprising most people on the downside, it is hard to see that fall being sustained. There seems little doubt that the figures should now start trending upwards again.
The decline in the Aussie dollar has been excellent news for our current account deficit position. We have managed to turn in trade surpluses for the past few months. While this is good news for our overall current account deficit position, it also means that the Aussie dollar is going to remain weak. All in all, the Consensus forecasts are bleak news for the world economy. As such, it would be impossible for Australia to remain insulated from this downturn. The duration of the downturn will be hard to gauge at this stage.
The difficulty any forecaster has in assessing the military action is trying to determine when this war is actually over. Does the death of Osama Bin Laden signify the end of the war? Are there thousands of others just like him waiting in the wings to move forward into the limelight? If so, when will the US consider that the wars against terrorism have finished? Already we have seen suggestions from some of the US leaders that this conflict could last as long as the Cold War did.
This is all going to mean that the very least we can anticipate is a period of some years that will be reasonably quiet in economic and GDP growth terms. Consensus also has forecast that the growth rate in the US for the period from 2001 to 2011 will be an average of 2.9 per cent.
This is certainly a lot less than the average growth that we have seen in the US during the past 10 years. On a longer-term basis, this figure is much more in line with trends in the US. It is still forecast to be the fastest growing economy in the Western world over that period.
If you were looking around the globe to identify areas of outstanding growth, it would seem that the Consensus forecast is for Spain to match the growth of the US. Most of the other nations expected to produce similar levels of growth are Canada, France, Italy and the Netherlands. Japan is unlikely to produce growth anywhere near these levels for the foreseeable future.
This probably doesn’t come as much of a surprise to anyone.
The first Consensus Economics forecasts since the events of September 11 have been prepared and released. Not surprisingly, prospects for growth around the world have been revised massively downward. For example, expected growth in the United States has been reduced from 1.6 per cent to 1.0 per cent this year. For the year 2002, the growth rate has been dropped from 2.7 per cent to 1.2 per cent. This is the single largest downward revision in a single month in the 10 years or so that these Consensus forecasts have been produced. This growth outlook encompasses a recession as conventionally defined as being two successive quarters of negative growth.
In terms of the broader world market, the prospects for growth have been slashed from 1.5 per cent this year to 1.2 per cent and from 2.5 per cent in 2002 to just 1.6 per cent. Interestingly, the inflation forecasts are unchanged this year at 2.1 per cent. Inflation prospects for 2002 have been reduced significantly, from 1.7 per cent to 1.4 per cent. This is no doubt in response to the significant decline in economic strength that year.
As indicated above, these are the first forecasts since the World Trade Center disaster. It is certainly true that these forecasts are in keeping with what we suggested would be the case just after September 11. We are certainly still in unchartered waters, however, we are now seeing the development of a recessionary environment all around the world.
Can we insulate ourselves from this here in Australia? No, we certainly can’t. Being such a commodity-based economy, we are going to feel the impact of these worldwide declines. Our commodities are no longer going to be sought by the world market.
So what can we look forward to over the next 12 months? Our GDP is forecast to grow at 2.5 per cent. This forecast has not been revised yet, to account for the WTC attacks. If we were able to sustain this we would be doing very well.
However, it must be said that it is highly likely to be revised downward soon. The reduced economic growth will have its own effects in other areas. Despite the unemployment figures released recently, surprising most people on the downside, it is hard to see that fall being sustained. There seems little doubt that the figures should now start trending upwards again.
The decline in the Aussie dollar has been excellent news for our current account deficit position. We have managed to turn in trade surpluses for the past few months. While this is good news for our overall current account deficit position, it also means that the Aussie dollar is going to remain weak. All in all, the Consensus forecasts are bleak news for the world economy. As such, it would be impossible for Australia to remain insulated from this downturn. The duration of the downturn will be hard to gauge at this stage.
The difficulty any forecaster has in assessing the military action is trying to determine when this war is actually over. Does the death of Osama Bin Laden signify the end of the war? Are there thousands of others just like him waiting in the wings to move forward into the limelight? If so, when will the US consider that the wars against terrorism have finished? Already we have seen suggestions from some of the US leaders that this conflict could last as long as the Cold War did.
This is all going to mean that the very least we can anticipate is a period of some years that will be reasonably quiet in economic and GDP growth terms. Consensus also has forecast that the growth rate in the US for the period from 2001 to 2011 will be an average of 2.9 per cent.
This is certainly a lot less than the average growth that we have seen in the US during the past 10 years. On a longer-term basis, this figure is much more in line with trends in the US. It is still forecast to be the fastest growing economy in the Western world over that period.
If you were looking around the globe to identify areas of outstanding growth, it would seem that the Consensus forecast is for Spain to match the growth of the US. Most of the other nations expected to produce similar levels of growth are Canada, France, Italy and the Netherlands. Japan is unlikely to produce growth anywhere near these levels for the foreseeable future.
This probably doesn’t come as much of a surprise to anyone.
