Sandra Horsfield talks up the global economy
ALTHOUGH in recovery, the global economy faces hangovers from the financial crisis according to a leading financial forecaster who has been in Guernsey to talk about the current state of the world and the outlook for 2010.
Barclays Wealth senior economist Sandra Horsfield said the world is now looking at a V shaped recovery and although there was cause for optimism, people should remain cautious.
‘It’s a positive picture but don’t expect too much. Recovery is here to stay but people shouldn’t expect that we can simply turn back the clock and say it was all a bad dream. There are still some hangovers that we have to deal with,’ she said.
Mrs Horsfield described 2009 as very unusual and turbulent but that people were now very optimistic. Barclays Wealth is forecasting global growth of 2.5% in 2010 which is just below the International Monetary Fund’s predictions of 3%. She said that recovery has been helped by a combination of fiscal support and low levels of interest rates and that world trade coming back very strongly and very rapidly in emerging nations had helped propel growth
But she added that despite the optimism, there would continue to be barriers to growth which could impact countries in 2010.
‘There will be headwinds. Policy makers have done a lot to help the economy and provided a good environment for recovery but that can not continue or be sustained indefinitely,’ she said.
Barclays Wealth forecasts that the UK will have low but positive inflation rates for 2010. Wages are a major influencer of rates and these would be slow to rise as there was increased competition in the jobs market due to higher levels of unemployment
‘How quickly the unemployment rate in the UK will rise will depend on how the fiscal screws are tightened. The comfort is that we know the UK government will want to achieve growth so will do what they can to support the economy,’
Mrs Horsfield said recently there had been talk about the rebalancing of growth away from Anglo-Saxon consumers towards emerging countries.
‘One of the root causes of the financial crisis and the recession was the excessive spending by households in the Anglo-Saxon countries from the start of the decade but now those households will need to rebuild their savings and will therefore reduce their consumption,’ she said.
‘In the long-term the emerging countries will increase their consumption but it can not compensate for the Anglo-Saxon share and so rebalancing world consumption will be a big ask.’
Ms Horsfield said that Guernsey has weathered the last 18 months very well which will benefit them in the future.
‘The very close ties that Guernsey has with the rest of the world means that when everywhere else is in recovery mode, that will help the island as well.’
Ken Bradley, Barclays Wealth director, said the return of investor confidence and asset class stabilisation will have a positive effect on Guernsey.
He added that the seminars at which Mrs Horsfield and Barclays Wealth Investment Manager Graham Marsh had spoken had been attended by more than 100 people from the island’s finance industry.
‘There seems to be a lot of appetite for economic forecasts and clients have been very interested in hearing what Sandra and Graham have had to say. There is still a lot of fear and so this allows people to ask specific questions.’ He said.
‘There is no doubt that everyone is more interested in the economy than ever before. It’s constantly in the news and it’s affecting all of our lives.’