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    How will 2010 be?

    Güven Sak, PhD23 June 2009 - Okunma Sayısı: 1141


    People go on not liking the economists. Admit that no one knows how we will exit from this phase. And we naturally do not like the economists who somehow cannot tell us the exit. But nowadays, there spread glimmers of hope. It is wise to evaluate this issue on a solid basis. What do people want to say by cherishing hope for 2010? A couple days ago, IMF's 2010 growth estimation to be announced at the G-8 meeting took place on Reuters. According to the estimation, world's national income will go up by 2.4 percent in 2010. Let's see what this number means and make an evaluation about 2010.

    This new and currently unofficial growth estimation for 2010 is in fact not the first growth estimation announced by the IMF for 2010. Up to now, IMF announced four growth estimations for both 2009 and 2010. First estimation was announced in April 2008. Then the estimation was revised in October 2008 and January 2009. Growth estimations were revised latest in April 2009. Therefore, this growth estimation made in June 2009 is the fifth revised estimation for 2010 growth. The table below covers all of the five estimations.

    TABLE 1: World Growth Estimations - IMF

    Date of Announcement

    Year for estimated growth


















    * Taken from the piece published at Reuters.

    Source: IMF, World Economic Outlook


    So, what type of a story does this table tell us? First, the table clearly tells us why people do not like economists nowadays. "They cannot foresee anything. They change their mind every day." Yes it is correct.  In case of IMF, it is seen that they have revised growth estimations five times dragging the estimation down each time. Eventually, the estimation will be quite low with respect to the initial level. These figures clearly indicate that we are getting to know the characteristics of the global crisis step by step though we did not yet comprehend it completely. We are gradually getting to learn what we are faced with. "Let's not be angry at economists. They have never seen such a period before and thus their capacity to foresee the future is blocked." Economists comprehend the issue step by step; so does the business world. In this period where "all that is holy is profaned", they observe the melting point of all kinds of reference points and wait. One who learned the intensity of the contraction step by step must comprehend the dynamics of recovery step by step. Here you have a "slow recovery" framework. In that case there is no option but to wait for "a couple more revisions". This is the first point that strikes attention at this framework.

    Now, let us switch to the latest revision for 2010 growth, the one covered at Reuters. Growth estimation for 2010 is for the first time revised upwards. Until now, estimations moved downward. It means that the economy looks better in the eyes of the IMF. This is a good development for all of us. It seems that the green shoot talks are not completely empty talks created by financial market activists. It is wise to note this. The point we have to keep in mind is: 2010 will be better than 2009. This is the second point that the framework reflects.

    However, growth estimation for 2010 was revised from 1.89 to 2.4 percent. It is almost half of the estimation made in April 2008 (4.77 percent). Thus, recovery is estimated to begin in 2010, but it is expected to be a quite slow one. Therefore, it is wise to make calculations based on this. Though the signal is positive, it is also quite week. And our radars do not cover 2011. This is the third point that strikes attention.

    Forget about what goes on in financial markets. They go on underlining the "normative". In financial markets, transactions are carried out based not on data but on imagination in particular nowadays. While we try to estimate what the crisis the character of which is not known will put on our ways; let us underline the known factors: 2010 is expected to be better than 2009. This is the first point. It is not yet known now 2011 will be in comparison with 2010. This is the second point.

    These are what we know for now. Beyond these is ambiguous in Keynesian terms. It is even impossible to see the hand in front of your face. So, is this bad for the business world? Yes, it is an impediment for making decisions. What happens? It strengthens the tendency to remain liquid. It turns "wait and see" into the most significant strategy.

    What did we say? One who learned the intensity of the contraction step by step must comprehend the dynamics of recovery step by step.

    This is a more significant reality for the business world: "Once burnt, twice shy".


    This commentary was published in Referans daily on 23.06.2009