Threat of double-dip global recession has ‘disappeared’

THE global economy is in a far better place than it was six months ago when “double dip” recession was still a major concern.

A new analysis of global trends suggests the threat of the world economy reverting to recession has eased.

“Now, the spectre of double-dips has disappeared from view, airbrushed away by rebounding economic data points and revived confidence readings,” said Donal O’Mahony, global strategist at Davy Research.

While global economic growth may fall from the current IMF estimate of 5% for 2010 down to 4.4% this year, the reality is the underlying drivers of that growth have improved.

In the current year economic activity will look a lot more like “a self-sustaining expansion as private sector de-leveraging instincts fade.”

His analysis says global growth performance will remain uneven, however, with emerging economies still the driving force behind the better quality growth story. It says improving prospects for the US economy will help bridge the gap to some degree between developing and developed nations.

A recent forecast from Merrill Lynch said the BRIC economies of China and India will provide the key engine of growth this year. Merrill put China’s output growth at over 9% for 2011, with the US sustaining its growth at last year’s level of 2.8%, while Europe will struggle, dragged down by the peripheral countries and the ongoing debt crisis facing the likes of Ireland, Portugal, Spain and Greece.

The European Central Bank in December forecast that the euro region economy expanded about 1.7% in 2010, but muted growth is on the cards in 2011, despite a robust performance expected from Germany.

British figures shocked the markets yesterday with the annual growth figure off by 0.5% at 1.7% against an IMF forecast of 2.9% for the last quarter, raising fears about the outlook for the current year, analysts said.

Mr O’Mahony said the important factor in the growth outlook for 2011 was that businesses globally were showing signs of investing while the banking sector, ravaged since 2008 by the credit crunch, are starting to recover their appetite for lending.

“The ‘quantity’ of 2011 global growth performance might not differ markedly from the 2010 outturn, but the ‘quality’ of such growth may substantially improve,” he said.