Note: This posting can also be found in the Kinaxis Supply Chain Expert Community web site.
The latest economic report issued from the World Bank warns that while the worst of the financial crisis may be over, the global recovery remains fragile, with the risk of a double-dip slowdown.
The report predicts that Global GDP will grow 2.7 percent in 2010, much better than the 2.2 percent decline noted in 2009. Prospects for the developing countries is much better, with a prediction of 5.2 percent growth in 2010, and 5.8 percent growth in 2011, up from the 1.2 percent growth experienced in 2009. World trade volumes fell by a staggering 14.4 percent in 2009, but are projected to expand by 4.3 percent this year, and 6.2 percent in 2011.
The significant takeaway however is that uncertainty continues to cloud the outlook, with business and consumer confidence, and the timing of the withdrawal of government economic stimulus all being an open question mark for sustaining a worldwide economic recovery.
To no surprise, East Asia, and in particular China, have led in the rebound of economy. China had 6.8 percent GDP growth in 2009, and is projected to have 8.1 percent GDP growth in 2010. The report notes that continuing excess capacity in manufacturing and only moderate increases in world trade growth will restrain GDP growth from accelerating much faster. I might add that last week China’s financial leaders imposed more restrictions on bank lending in an attempt to cool-down lending excesses. On the not so positive end, the report notes that developing Europe and Central Asia were hardest hit by the crisis, with GDP falling an estimated 6.2 percent in 2009. Latin America however, weathered the crisis much better than in the past.
Other noteworthy predictions that should concern global supply chain professionals are the predictions that oil prices are expected to remain broadly stable in 2010, averaging about $76 a barrel, and that commodity prices should rise three percent on average. The report further notes that it may take several more years before individual economies recoup the losses already endured.
The bottom-line remains, as we noted in our 2010 prediction, that business recovery will remain slow and sporadic and that supply chain planners will need to have a sharp focus on individual regions and countries, to sense and respond to any significant changes in demand or supply. U.S. based companies doing business internationally will especially remain challenged throughout 2010 and beyond.