China to Once Again Drive Growth in 2009

According to the Organization for Economic Cooperation and Development (OECD), the US subprime mortgage crisis has spread to many nonfinancial sectors and has had widespread negative effects on world economies. In comparison to the 1.4% GDP increase for 2008, OECD countries’ GDP will decline by 0.4% for 2009. In the November update of the International Monetary Fund’s (IMF) World Economic Outlook, the organization anticipates the global GDP growth rate for 2009 to be 2.2%, a decrease from 2008 growth of 3.7%. The IMF cited the combination of a decrease in demand from advanced economies and the deterioration of credit conditions for emerging economies as reasons. Both the OECD and IMF stressed the uncertainty of their projections due to the inability to forecast how quickly government policies would help ease the crisis.

North America

The OECD estimates that a continuance of the credit crunch and the worsening of the labor market will cause US GDP to decrease 0.91% in 2009. The IMF predicts that US GDP will decrease 0.7%. The Business Roundtable’s December 2008 CEO Economic Outlook Index showed that out of 105 CEOs surveyed, only 10% expect their companies’ US capital expenditures to increase over the next six months. The survey also found that 39% of CEOs expect no change in capital spending, while 52% expect it to decrease. Canadian GDP in 2009, according to the OCED, will decline by 0.485%, while the IMF forecasts it to increase 0.3%.


The Euro Area entered a recession in the third quarter of 2008. For 2009, the OECD estimates a 0.6% decline in Euro Area GDP, down from 1.9% growth in 2008. The IMF predicts a 0.5% decline, down from the previous year’s 2.1% growth. France’s GDP is expected to undergo the least decrease of the three largest European economies, according to both the OECD and the IMF, which estimate declines of 0.4% and 0.5% for the country, respectively. The OECD and IMF estimate Germany’s GDP will drop 0.7% and 0.8%, respectively. The UK’s sharp decrease in domestic demand, fueled by an unhealthy housing market and construction sector, has led the OECD and IMF to forecast a GDP decline of 1.1% and 1.3%, for the country, respectively. The IMF forecasts that the fastest-growing economies in developing Europe will be the Slovak Republic, with 5.6% GDP growth in 2009, and Romania, with 4.8% growth.

Latin America

The IMF argues that a drop in commodity prices, close economic ties to larger countries such as the US and a drop in tourism will contribute to GDP growth of 2.5% in 2009 for IMF Western Hemisphere countries (Latin America, Mexico and the Caribbean nations). Western Hemisphere countries grew 4.4% in 2008. According to a report released by the Economic Development Division of the UN and the Latin American and Caribbean Institute for Economic and Social Planning, the GDP growth rate in 2009 for Latin America and the Caribbean will be 1.9%, down from 4.6% growth in 2008. The report estimates that in 2009 Argentina and Chile will grow 2.6% and 2.0%, respectively. In 2009, Brazil’s GDP is expected to grow 3.0% by both the IMF and OECD, compared to their 2008 growth calculations for the country of 4.4% and 4.5%, respectively. The IMF forecasts the GDP growth rate for Mexico to be 0.9% for 2009.

Asia Pacific

The IMF predicts that GDP growth in the emerging Asia Pacific Region, which is defined as Asia, excluding Australia, New Zealand and Japan, will be 6.5% in 2009, compared to 8.8% growth in 2008. The IMF asserts that GDP will not decrease further because lower commodity prices have made trade more favorable for countries in the region. According to the Asia Development Bank (ADB), the total GDP growth rate for Asia will be 7.2% in 2009, compared to 7.5% growth in 2008. India is estimated to grow 7.0% in 2009, compared to 7.4% growth in 2008. Bank data suggests that Korea’s GDP growth for 2009 will be 4.5% and Singapore’s growth will be 4.6%.


Based on Japanese government figures, Japan entered into a recession in the third quarter of 2008’s calendar year. According to both the IMF and the OECD, Japan grew 0.5% in 2008. For 2009, the IMF predicts that the country’s GDP will decrease 0.2% due to a decline in exports, investment and private consumption, as well as low wages. The OECD expects a 0.1% decrease in GDP in 2009. The Bank of Japan has forecasted 0.6% growth for fiscal 2009, which ends March 31, but many news reports have recently stated that the Bank will release an even lower forecast when it convenes later this month.


The OECD’s estimate for China’s growth in 2009 is 8%, in comparison to 2008 growth of 11%. Despite this slowing growth, the OECD claims that China’s economy is currently sound. The IMF predicts a growth rate of 8.5% in 2009, but maintains that China’s economic future is unclear due to a decrease in exports and the country’s waning housing market. Both organizations agree that the recent stimulus package issued by the government (see IBO 11/30/08) is working to increase demand.

Chart: Region Growth Predictions for Instrument Sales in 2009


Japan 3.6%

Rest of World 3.8%

Latin America 4.0%

Europe 4.5%

US & Canada 4.8%

Asia Pacific 7.5%

China 8.3%

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