Friday 10 February 2012

No 213: UCL Conference. Global Economic Outlook. Part 2.

A FORECAST of future economic situation considering whether there might be a new global economic crisis was an important part of the speech held by Dr. Linda Yueh. 
This possible forecast was based on summing up different aspects of economic growth.

In our view, one of the most interesting data was a comparison of nowadays’ recession with recessions during different economic situations the humanity has already experienced.



The graph clearly illustrates that the pattern the world economy is following during current recession is between crises of 1991 and the Great Depression. It can seem not as bad as it could be, however, if during the first year of the recession its speed was the same as Latin American crisis (which would have meant that economy could have been relatively easy to be restored), nowadays the speed of the recession is closer to the Great Depression rates. This means that in order to restore global economy with the lowest costs, fast measures should be taken to not allow the economy fall as it did during the Great Depression.

These worries can be
supported by another graph shown by Dr. Yueh.



This illustrates the output gap during the last 30 years. We can compare the output gap of European countries in the begging of the 90ies when Europe was experiencing exchange crisis mentioned in the previous graph and the figure for these countries nowadays.

As can be seen, European countries shown in the graph had mostly positive output gap. The United Kingdom had a negative one, however the figure was not so significant as it was slightly above -1 per cent, compared to -6 per cent that it had in 2010. Other countries had their gap lower than -5 per cent in 2010. 

However, in 2009 all the figures stopped dropping and the whole pattern had flattened a little.

by Galeeva Dariya