A YEAR ago almost every economy in the world was being walloped. The degree of pain varied. In rich countries output plunged; in China and some other emerging economies growth slowed sharply. But the slump was as striking for its synchronicity as its severity.
The opposite seems true of the recovery. China’s rebound began earliest and has been the most spectacular (see article). America’s economy began growing in the middle of 2009 and seems to have accelerated sharply in the final months of the year. Initial GDP estimates for the fourth quarter are due on January 29th, and many analysts expect annualised GDP growth to have shot up to 5.5% or more. News from the euro zone and Japan is rather gloomier. Germany emerged from recession before America, but its number-crunchers recently suggested that growth fell back to zero in the fourth quarter. The Japanese recovery also seems to be fading.
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In America soaring GDP growth is likely to be a one-quarter wonder, driven by a rebuilding of firms’ shrivelled inventories. Output growth will slow in 2010—the question is by how much. Optimists argue that every deep post-war recession has been followed by a vigorous recovery and that growth will be well above its trend rate in 2010. But a gloomier outcome seems all too plausible. There are few signs of job growth. Much household-debt reduction still lies ahead. And there is the risk of a correction in stockmarkets.
But even a sluggish American recovery will outpace other big rich economies. The euro zone faces two different but equally painful problems. Former bubble economies such as Spain and Ireland are suffering a painful hangover. Germany, like Japan, is bedevilled by chronically weak domestic demand. Consumers are reluctant to spend and, so far, buoyant export growth has not incited firms to invest, despite hopes to the contrary.
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A multi-speed recovery could also affect imbalances between countries’ current-account surpluses and deficits. America’s current-account deficit and China’s current-account surplus have both halved from their peaks as a result of the crisis, to around 3% and 6% of GDP respectively. Whether that reduction continues depends first on oil prices and second on the pattern of global demand. Imbalances will only stay low as the global economy recovers if surplus economies, especially China but also countries like Germany and Japan, rely on domestic demand while the big borrowers, especially America, cut their budget deficits and save more. Economies are now growing at different rates. They must also grow in different ways.
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