The world economy has entered a much-anticipated recovery and rebuilding phase.
South Africa’s economy
Economic growth has turned positive. Successful support has drawn a line under demand and eliminated systemic risk in the global financial system.
Financial indicators, buoyed by liquidity are beginning to see relocation between variables. As prospects have improved, industrial production has staged a comeback.
World trade is beginning to expand. However, testaments to the extent of the destruction and most economic variables remain below pre-crisis levels. The route back to historical norms is uncertain – especially as deciphering fundamentals from transitory improvements in real economic variables are hazy.
Even though the contours of the domestic recovery are delicate, the foundation for a sustainable reconditioning in activity is being established. The front-loading of accommodative public policies is yet to fully permeate spending behaviour, alluding to an improved outlook in 2010.
It will take time
Successful support has drawn a line under demand and eliminated systemic risk in the global financial system. Industrial production and world trade are beginning to pick up. As prospects have improved, stock and commodity prices have staged a comeback from lows reached earlier this year.
However a growing number of forecasters and commentators seem to believe the global economy will rebound to full employment in no time. It is important to note that for now, this is unlikely as we need to appreciate the extent of destruction that has occurred.
The likely path to the new "normal" will be a long gradual one with a stunted stumble towards equilibrium. However, testament to the force of destruction, despite bottoming, most economic variables remain significantly lower than pre-crisis levels. The return to pre-crisis levels will be difficult and are uncertain at this point.
