Economic Survey 2-2009

The global recession in the wake of the financial crisis gathered pace in the first quarter of this year. Most OECD countries now have four consecutive quarters of falling GDP behind them. Unemployment has risen at record speed, and in many industrial countries may pass 10 per cent in the course of 2009. The economy in high-growth countries like China and India is still expanding, but there, too, at a markedly slower pace. The contraction has taken hold despite a highly expansionary counter-cyclical policy expressed through both government budgets and monetary policy. Central bank policy rates have been cut to close to zero in most countries, and a strongly expansionary liquidity policy is being conducted. The banking industry still has major problems, and demand and output continue to be limited by restrictive lending practices. As a result of the cyclical downturn and the sharp fall in commodity prices in autumn 2008, inflation is now very low worldwide. However, commodity prices have risen considerably since bottoming out at around the turn of the year, and in consequence the risk of deflation is considered lower.