The global economy may not start to recover from the financial tsunami for at least another two years a regional head of major investment house, Morgan Stanley, has warned.
Speaking at the World Shipping (China) summit on Thursday, Stephen Roach, Morgan Stanley Asia chairman, said that even if economic conditions start to improve in 2010 or 2011, "it is not going to be a strong recovery" but would instead be weak and fragile.
Consequently, the world was unlikely to return to the rate of economic activity seen last year until 2013 at the earliest. "I don't see us getting back to the same levels seen in 2007 for at least five years." Mr Roach added.
His grim forecasts have an obvious impact on international bulk and container shipping markets.
He warned that China's economic growth, which fell to 9.9% in the first nine months of this year compared with 11.9% in 2007, is expected to fall further as the impact of recession in Europe and Japan took its toll. China's economy has already been battered by the downturn in the US.
Mr Roach set the expected drop in exports to Europe and Japan would cause China's GDP growth to fall to between 7% and 8% next year which is "slower than most senior officials in China would like".
Commenting on the global economic outlook in 2009, Mr Roach added: "It's going to be tough; most likely it is going to be very tough."
He believed the Chinese economy would suffer because it was heavily dependent on export performance and not by domestic consumption.
Mr Roach said that while governments around the world had taken steps to stablise the financial markets and there were "tentative signs the medicine was slowly beginning to work", the "American consumer is toast – finished".
He said the 14-year US consumer boom generated average consumption growth of 4% a year which, rather than supported by employment or income growth, was credit or debt financed. The resulting "multi-year adjustment will slow the US economy over the next several years by a significant margin".
Mr Roach thought the US would be lucky to achieve economic growth of 1.5% over the next three years.
As a result he believed it was important for Barack Obama, the US president-elect, to turn the political rhetoric of the US presidential campaign into positive action to revive the flagging US economy and America's standing in the world as soon as possible.
As part of this, Mr Roach thought Mr Obama needed to reaffirm an US commitment to globalisation. "He needs to stand up as a defender of free trade and its strategic relationship with China and other allies and partners," Mr Roach said.
Source:http://www.lloydslist.com