Azerbaijan, Baku, Nov. 3 / Trend A.Badalova /
The global economy slowly continues to show signs of stabilization. However, international experts disagree about the future of the economy and specifically its full recovery. Financier George Soros said the global economy will face a second crisis wave and economic growth may end in 2010 or 2011 and lead to another recession.
However, Californian East Bay University Professor of Economics James Ahiakpor believes the worst is behind.
"The sense of extreme anxiety that caught the world in the fall of 2008 is over," he wrote Trend in an e-mail. "I think there has been a considerable adjustment of assets and other prices because of that anxiety and we now have considerable stability in most markets, albeit at lower values than last year."
According to Ahiakpor, the growth of the economy depends on how individual producers and consumers will act in response to market incentives, which are considerably influenced by their governments.
If governments around the world maintain consistent and stable economic policies that do not divert resources into areas that asset owners would not have chosen, the downturn should not last another year, Ahiakpor said.
Meanwhile, Cornell University Macroeconomics Professor Iwan Azis said the worst is not over. A possibility of a double-dip crisis is high, he wrote Trend in an e-mail.
"The world economy is still falling, but at the slower rate," Azis said.
Regarding the U.S. economy, the expert said the recession is likely to be over by mid-2010, which is later than the recovery date predicted by the U.S. Presidential Administration and U.S. Federal Reserve.
Last week, the U.S. Department of Commerce publicized data on a 3.5-percent growth of GDP in the third quarter, meaning the country is overcoming the recession that it entered in December 2007. In the second quarter, the country experienced economic decline by one percent and by 6.4 percent in the first quarter.
"The Federal Reserve declared that the U.S. economy has begun to 'level out' amid growing confidence in U.S. markets that the country is heading for a recovery," according to Azis' "Predicting a Recovery Date from the Economic Crisis of 2008" report. "Indeed, by the third quarter 2009 the U.S. economy has shown increasing signs of stabilization. Some financial conditions have improved, the interbank spreads have returned close to pre-crisis levels, and corporate issues have rebounded. Yet, a survey conducted by the Association for Financial Professionals in early October showed that only 11 percent of chief financial officers and treasury executives believed the recession had ended, and 20 percent saw the downturn winding down before the end of the year. On the other hand, a large majority believed the recession would continue well into 2010."
According to Azis, the role of the financial sector is so vital that the first policy measure taken by the new U.S. administration was directed toward restoring this sector.
"Problems in the U.S. financial and housing markets are so severe and interrelated that the adverse effect on the economy worked not only directly through a traditional credit crunch that caused consumption and investment to fall but also indirectly through the non-functioning of the securities market," Azis added.
"The latter was the most important source of financing for U.S. business sector," he said. "The decreasing value of bank assets has damaged the balance sheet of many financial institutions, so that even their purchase by the Federal Reserve will not be able to promote rapid recovery of the securities markets."
According to the expert, since the deterioration of most asset values corresponds to mortgage-related assets, the resolution of the credit crunch problem depends largely on what happens in the housing market, particularly on the size of foreclosures and the level of housing prices.
"But as long as confidence is not restored and problems in the financial and housing sector remain, almost all measures are bad solutions," Azis said.
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