Experts warn of weak economic recovery

Friday, January 29, 2010

Pretoria - Economists and industry leaders at the World Economic Forum (WEF) meeting in Davos, Switzerland, have warned of weak recovery and over regulation of financial sectors.

According to the Chairman of Roubini Global Economics Monitor in the United States, it will be a U-shaped recovery.

"There is a risk of a double-dip recession. Emerging market economies will do better than advanced economies," said Nouriel Roubini.

He said labour market conditions remained very weak and credit markets weere still "very crunched."

"Over-saving countries are not increasing spending and lowering savings rates enough to compensate for the drop in growth in economies that had high consumption before the crisis, said Roubini.

Panellists at the forums believe multilateral coordination of financial reforms and the rebalancing of the global economy will be hard to achieve.

"Getting national solutions is difficult enough; getting multinational solutions is almost impossible," said David Rubenstein, Co-Founder and Managing Director of the Carlyle Group in the US.

"We are sitting at a watershed moment," argued Arif Naqvi, Founder and Group Chief Executive Officer of Abraaj Capital in the United Arab Emirates.

"We do need multilateral solutions." Dennis Nally, Chairman of PricewaterhouseCoopers.

Meanwhile, the world leaders have called for caution in designing economic exit strategies as the global economic recovery is still "tentative."

South Korean President Lee Myung-bak said the global economy has just gone through a period of crisis and is now showing tentative signs of recovery.

Lee, whose country will host the next Group of 20 (G20) summit in November, called on G20 members to consider implementing an exit strategy for the unprecedented fiscal and monetary stimulus programs adopted by many countries to deal with the crisis, but urged them to tread gently.

"One of the tasks of the G20 will be to coordinate the transition to a more normal policy stance once the appropriate conditions are in place," he said.

Organised under the theme, "Improve the State of the World: Rethink Redesign and Rebuild," this year's annual meeting comes within the context of promoting a global system of governance.

However, Team SA, a partnership between South African business and government, will aim to position the country as "the next big thing."

President Zuma earlier told the summit that the 2010 FIFA World Cup was an opportunity for the world to see and experience Africa in a different way.

"It is an opportunity to tackle stereotypes and preconceptions about the continent, and explore new frontiers of interaction and cooperation. It is an important milestone in the regeneration of the continent."

Minister of Trade and Industry, Rob Davies, said another agenda that the South African team will push is the inclusion of the African continent in the decision making.

"It was important to ensure that any global solutions are developed by all stakeholders with the inclusion of a strong African representation. "

He added that these so called "fresh solutions for a better world" are more often than not simple concepts with a tangible impact and require nothing less than thinking defined by seeing solutions and not barriers.