"World growth is projected to fall to ½ percent in 2009, its lowest rate since World War II. Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy. A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit markets are unclogged. For this purpose, new policy initiatives are needed to produce credible loan loss recognition; sort financial companies according to their medium-run viability; and provide public support to viable institutions by injecting capital and carving out bad assets. Monetary and fiscal policies need to become even more supportive of aggregate demand and sustain this stance over the foreseeable future, while developing strategies to ensure long-term fiscal sustainability. Moreover, international cooperation will be critical in designing and implementing these policies."For those of us who lead strategic planning efforts, we work through a rigorous process of establishing a range of possible future scenarios (reference "Managing Amid Uncertainty"/PDF by author Michael Raynor of The Strategy Paradox) and build strategies that are consistent with those scenarios. We use macro economic factors and more industry specific factors.
The IMF's report provides the following macro economic factors:
- Global growth in 2009 is expected to fall to ½ percent when measured in terms of purchasing power parity and to turn negative when measured in terms of market exchange rates.
- The global economy is projected to experience a gradual recovery in 2010, with growth picking up to 3 percent.
- Financial markets are expected to remain strained during 2009. In the advanced economies, market conditions will likely continue to be difficult until forceful policy actions are implemented to restructure the financial sector, resolve the uncertainty about losses, and break the adverse feedback loop with the slowing real economy. In emerging economies, financing conditions will likely remain acute for some time—especially for corporate sectors that have very high rollover requirements.
- Growth in emerging and developing economies is expected to slow sharply from 6¼ percent in 2008 to 3¼ percent in 2009, under the drag of falling export demand and financing, lower commodity prices, and much tighter external financing constraints (especially for economies with large external imbalances).
- The IMF's baseline petroleum price projection has been revised down to $50 a barrel for 2009 and $60 a barrel for 2010 (from $68 and $78, respectively, in the November WEO Update), and risks to this projection are on the downside.
- In the advanced economies, headline inflation is expected to decline from 3½ percent in 2008 to a record low ¼ percent in 2009, before edging up to ¾ percent in 2010. Moreover, some advanced economies are expected to experience a period of very low (or even negative) consumer price increases. In emerging and developing economies, inflation is also expected to subside to 5¾ percent in 2009 and 5 percent in 2010, down from 9½ percent in 2008.
References: IMF World Economic Outlook Update 28 January 2009, PDF)
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