Global Economic Prospects

The Issue

The United States and the world economy have embarked on economic recoveries that will gather strength in the second half of 2009 and proceed fairly strongly through next year and into 2011, predicts Michael Mussa. These recoveries may not be quite as vigorous as earlier postwar recoveries following deep recessions, but they will surpass almost all current forecasts on the upside and will once again illustrate that steep recoveries tend to follow deep recessions. While most economic forecasters expect a tepid recovery, and some fear a "double dip" in which economies fall back into recession at an early stage, Mussa expects "a V-shaped recovery" to be the most likely course. He forecasts that real GDP growth in the world will be –1.1 percent this year and 4.2 percent in 2010, spurred in part by greater than anticipated growth in developing countries and emerging markets. Real GDP growth in the United States will be –2.4 percent in 2009 and 4 percent by the end of next year. The US unemployment rate in 2009 peaks at or a little below 10 percent but will fall below 9 percent by the end of 2010. China and India, which have been leading the global recovery, will register growth rates of 8.3 and 6.4 percent, respectively, in 2009 and 9 and 7.5 percent, respectively, in 2010. Mussa’s forecast for 2009 is modestly above corresponding forecasts by the International Monetary Fund (IMF) but considerably higher than the IMF forecasts for 2010. Economic performance over the next 16 months will reveal whether Mussa’s "conservatively optimistic" view is correct.

Essential Reading from the Institute

Paper: Global Economic Prospects as of September 2009: Onward to Global Recovery [pdf]
by Michael Mussa, Peterson Institute for International Economics
Paper presented at the sixteenth Global Economic Prospects meeting held at the Peterson Institute, Washington, DC
September 17, 2009

Paper: World Recession and Recovery: A V or an L? [pdf]
by Michael Mussa, Peterson Institute for International Economics
Paper presented at the fifteenth semiannual meeting on Global Economic Prospects
April 7, 2009

Speech: Global Economic Prospects: L- or V-shaped Recovery? [pdf]
by Simon Johnson, Peterson Institute for International Economics
and Michael Mussa, Peterson Institute for International Economics
Transcript of the fifteenth semiannual meeting on Global Economic Prospects
April 7, 2009

Testimony: The Global Economy: Outlook, Risks, and the Implications for Policy
by Simon Johnson, Peterson Institute for International Economics
Testimony before the Senate Budget Committee
January 29, 2009

Paper: The Subprime and Credit Crisis [pdf]
by Morris Goldstein, Peterson Institute for International Economics
Paper based on transcript of speech presented at the thirteenth semiannual Global Economic Prospects meeting
April 3, 2008

Testimony: The World Economy and the Outlook for the United States
by C. Fred Bergsten, Peterson Institute for International Economics
Testimony before the Budget Committee of the US House of Representatives
December 5, 2007