What’s Ahead for the Global Economy in 2008?

  • Written by David
  • January 15, 2008 at 10:20 am
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  • Views from Wharton School of Economics…

    I’ve placed a few comments below. For the full PDF verison of the report click here.

    Though the subprime mess and rising oil prices slammed the U.S. economy during much of 2007, other emerging markets — especially China and India — seem to be on a roll. China’s growth rate of more than 11% is likely to continue, and India, too, should be able to sustain a high rate of GDP growth, even if it slows from last year’s 9%. Latin America, meanwhile, is cautiously optimistic but could see a moderate decline in 2008. The Knowledge@Wharton Network sites — including Universia Knowledge@Wharton, China Knowledge@Wharton and India Knowledge@Wharton — spoke with Wharton faculty and other experts about what to expect during the coming year.

    Siegel expects gross domestic product to grow at an annualized rate of 1% to 2% during the first half of the year, and perhaps 3% in the second half. “I’m predicting that we could rise to 3% in the second half of the year because I think that by the middle of this year, housing will hit bottom,” he notes, adding that the economy could fall into recession if rising oil and gasoline prices dampen consumer spending

    Siegel did note that the financial markets were jarred by a recent report that unemployment in the U.S. had risen in December to a two-year high of 5%, but he doesn’t think the situation will get worse, adding that the number of people with jobs had continued to rise. “The unemployment rate seems very anomalous to me. It’s not likely to stay that way next month…. You’ve got to do some smoothing on that [statistic]. My feeling is it will go down to 4.9% or 4.8% once we get the January data.”

    Siegel adds he is “fairly optimistic” about the stock market, predicting a 10% to 12% return for broad market gauges like the Russell 3000 and Standard & Poor’s 500.

    According to Meyer, the Chinese economy will be one of the biggest factors to influence the financial markets and world economy this year. China’s huge demand for oil, metals and other commodities has pushed commodity prices up around the world. But Chinese officials are now taking unprecedented steps to slow their economy to control inflation, Meyer says. That should stop the spike in commodity prices, but it also will likely cause a slowdown in growth worldwide in 2008.

    Web version of article

 

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