Today, and over the foreseeable future, a series of events — call them global megatrends — will have a profound impact on the world economy. Each issue of Point of View will share insight into these trends and how the institutional investment community is preparing to address them.
The global economy is stabilizing, thanks to the accommodative monetary policies, financial sector support and massive stimulus packages by countries around the globe. In many cases, however, the bulk of economic stimulus spending has yet to occur. In the United States, for example, the International Monetary Fund estimates only US$46 billion, or 11%, of authorized expenditures had taken place through May 2009. Still, many economists say the stimulus packages are having an effect and urge countries to continue with their spending programs. Two sectors expected to benefit from stimulus spending are infrastructure and clean technologies.
Modest global economic growth is expected to return by the end of 2009, fueled by the performance of emerging economies. Advanced economies are not projected to show a sustained uptick in economic activity until the second half of 2010.
Although consumer and business spending is expected to remain tight, government stimulus should act as a counterbalance. Northern Trust economists forecast quarter-over-quarter growth for real GDP beginning in the fourth quarter of 2009 and continuing through 2010. For more economic insights, go to the Insights & Research section of northerntrust.com.
In response to the global economic crisis, many countries announced huge long-term infrastructure programs. Approximately US$3 trillion in global infrastructure spending is expected during the next two years, paving the way for potential long-term economic growth.
G-20 nations have committed almost US$400 billion in economic stimulus targeting clean technologies, such as renewable energy, improved electrical grids and cleaner cars. Of note is Chinaâ€™s more than US$200 billion allocation.