Vital Signs: IMF World Economic Outlook Update (January 2009)

At the WEF Davos January 2009 Meeting, the session called "Rebooting the Global Economy" began with Matthew A. Winkler (Editor-in-Chief, Bloomberg News, USA) providing a rundown of the International Monetary Fund's (IMF) latest outlook. Going to the source January 2009 World Economic Outlook Update, the IMF gives us this summary:

"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)

World Economic Forum Report: US $515 Billion needed in Green Investments

The WEF's Green Investing: Towards a Clean Energy Infrastructure report was released on 29 January 2009 and it contains some vital signs for Green investments:

"New Energy Finance, which collaborated with the World Economic Forum on the report, warns that unless at least US$ 515 billion per annum is invested in clean energy between now and 2030, carbon emissions will reach a level deemed unsustainable by scientists, causing temperatures to rise by two degrees globally."

"The report identifies eight emerging, large-scale clean energy sectors that are expected to significantly contribute in the move to a clean energy infrastructure of the future: onshore wind, offshore wind, solar photovoltaic, solar thermal electricity generation, municipal solar waste-to-energy, sugar-based ethanol, cellulosic and next generation biofuels, and geothermal power."

"Clean energy opportunities have the potential to generate significant economic returns. The report shows that even after a tumultuous 2008, an index of the world’s 90 leading clean energy companies had a five-year compounded annualized return of almost 10%, unmatched by the world’s major stock indices."

Other highlights from the report include:
• Clean energy investments increased from around US$ 30 billion in 2004 to over US$ 140 billion by 2008. Investments in 2008 exceeded expectations at US$ 155 billion (the report is based on projections for 2008 – which suggests that US$ 142 billion would be invested by year-end).
• Investment in clean energy has not only increased, but has also diversified geographically. Developing countries attracted 23% (US$ 26 billion) of asset financing in 2007, compared to 13% (US$ 1.8 billion) in 2004.
• In addition, four key enablers for a shift to clean energy will be energy efficiency, smart grids, energy storage, and carbon capture and storage.
• Well-developed conditions for innovation, markets for clean energy through public procurement, energy efficiency standards and stable and simple policies are essential to meet the climate change challenge

The report provides a solid foundation for scenario planning for clean energy initiatives.

References:
Press Release: World Economic Forum Report: US $ 515 Billion needed in Green Investments;

Shaping an Opportunity Out of Crisis: A message to participants in the World Economic Forum Annual Meeting 2009 from Members of the Global Agenda Council on Climate Change

WEF 2009 (Davos) - "Shaping the Post-Crisis World"

The 2009 World Economic Forum, the overall them being 'Shaping the Post-Crisis World', is under way in Davos, Switzerland 28 January 2009 to 1 February 2009. The WEF backgrounder is summarized here:

"The World Economic Forum Annual Meeting 2009 promises to be one of the most important events in the Forum’s history. The significance of the Meeting is such that 42 heads of state and government have already confirmed their participation in Davos-Klosters where they will join business leaders as well as NGOs, Trade Unions and experts from a wide range of fields. The Meeting will be focused on managing the current crisis and shaping the entire post-crisis agenda, from economic reform to climate change. Participation is by invitation only and strictly limited to the criteria and quota of each stakeholder group. The World Economic Forum Annual Meeting 2009 is characterized by the unparalleled quality of its business participation. This year, over 2,500 participants from the business, political and cultural communities will address the Annual Meeting’s overall theme − Shaping the Post-Crisis World. There is a unique opportunity at the beginning of 2009 for leaders from industry, government and civil society to shape this transformation at an early stage for the benefit of all stakeholders. The objective of the Annual Meeting 2009 is to catalyse a holistic and systematic approach to improve the state of the world in a manner that integrates all stakeholders of global society. An important preparatory conference convened the most comprehensive network of experts in the world in Dubai in November. Over 700 members of 69 Global Agenda Councils met to advance solutions to the most critical challenges facing humanity. Their insights and recommendations have helped to catalyse solutions for the manifold challenges we face in 2009."

The webcasts are provided at the following link: http://gaia.world-television.com/wef/worldeconomicforum_annualmeeting2009/

For those looking for a English mainstream media view of the conference, check these links: CNN http://edition.cnn.com/SPECIALS/2009/news/davos/ and The Times(UK) http://business.timesonline.co.uk/tol/business/economics/wef/

The panel sessions this year are a rich source of metrics necessary for forward looking executives when planning future business scenarios. In a series of forthcoming entries, I will be reviewing the sessions with a specific look at the global economic metrics and vital signs mentioned.

WEF References: WEF Global Risks Report 2008, Session Summaries