Forecast

Economic development

The global economic recovery is set to continue in 2010. The pace will, however, likely be moderate since business activity remains under considerable strain despite the improved environment in the major economic regions. This is because, among other factors, the proper functioning of the world's financial markets is still impaired. The already difficult state of the labour markets is expected to worsen. Last but not least, the impetus from the political sphere will weaken as the year progresses: economic stimulus programmes, which played a significant role in stabilising and reviving business activity, are for the most part coming to an end. Most notably, tax incentives from the political side will be scaled back, since the budgets of many countries are under heavy pressure. All in all, it is likely that the economic trend will gradually run out of steam.

Following a relatively vigorous surge in gross domestic product (GDP) in the United States, this is likely to flatten off over the course of the year. The strains caused by the crisis in the financial system are heavy. 2010 is expected to bring a decline in consumer spending and a rise in the savings rate. Incomes have also been hit hard by the sharp climb in unemployment. Overall output in the US is actually expected to contract in 2010. Despite this trend, however, the United States will not slip back into recession, although its weakness will be a drag on the global economy. The ifo Institute for Economic Research estimates real growth in GDP for 2010 at 1.8%.

The upswing in Germany is likely to be only modest in 2010. Endogenous stimulating factors will gradually gain in strength again, although flanking economic stimulus programmes are slowly being wound up. New capital investment and job creation are being hampered by restrictive lending practices. The upsurge in exports should remain moderate, since the economy is scarcely improving in key buyer countries. The import trend presents a similar picture. The average figure for real growth in GDP calculated by the ifo Institute is 1.7% for the year.

Economic activity in the Eurozone should pick up somewhat. It is, however, unclear how vigorous the revival will be. The pace of growth will probably flatten off as economic stimulus programmes come to an end.

China's economic outlook for 2010 is again positive. Although the government's extensive stimulus package will end towards the middle of the year, the German ifo Institute still expects GDP to grow by 7.8% in 2010.

The economic upswing in Japan will be lacklustre initially, before slowing gathering momentum. Domestic demand will scarcely pick up, while foreign trade should benefit from the resurgence of economic activity in the emerging markets of Asia.