epilogue

As the United States awaits its 44th President, my hopes on the revival of the world economy has dwindled further since the last time I wrote on this topic. EU countries, France especially, wants greater control of its banks. Greece and Italy are already teetering on the verge of bankruptcy, and after suffering heavy losses from sub-prime assets in the US, UK also seems to be standing on the brink.

With excess supply, and a gloomy outlook on global energy demand, oil fell below $34 today. So much that Goldman Sachs, on Monday said that the price of oil could fall below $30 a barrel in the short-term. Since record-keeping for freight rates began, the rates for the Asia-Europe sector have virtually dropped to zero. It is no wonder that the World Bank says that global trade is likely to decline this year for the first time since 1982.

Even after President Barack Obama got sworn in a few minutes ago, the markets in the US refused to show signs of improvement. And, more likely so, President Barack Obama’s inaugural speech categorically warned of impending economic worsening.

It is but natural that the economy will likely get much worse before getting better over the course of 2009. I expect much weaker GDP growth rates in the range of 3.0-3.5% per year in the next two and probably the third quarter. Any acceleration that comes will be towards the fourth quarter.

The immediate future doesn’t look good at all. All my worries now hinge on the depth of the point of inflection before the economy starts to recover.

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