Speaking to ET, EIU directorglobal forecasting Robert Ward and profile of Economist Intelligence Unit said that there would be a slowdown in the global economy in 2009. India and China may slowdown, but will still grow rapidly relative to global standards. While the OECD and Japan may stagnate, the US, European Union and the UK may contract during the year. Russia and the Middle-East, too, will slowdown, as these economies have been relatively dependent on oil exports and prices are softening.
Mr Ward said that the crisis would impact emerging economies with a lag. And accordingly, EIU has scaled down its growth forecast for the global economy, including India and China for the current year, as it feels that there will be some negative impact of the crisis on these economies.
The on-going global crisis could be divided in two phases. One that is purely financial based on the problem with structured finance products. The second would be the one in which see the impact of the financial crisis in the real sector. The second one has already started in the US started and could last until 2011, he said. We saw it happen in the late nineties, when banks went bankrupt and then impacted the real economy and took a while for the economy to be back on the track. The negative impact of the financial crisis on the real economy is with a lag.
Wealth destruction in the global economy has been colossal. This means less money everywhere and lesser M&As. FDIs to India may slowdown. But this would be best opportunity for companies to consolidate. Mr Ward said that India story is still strong and that India is an exciting destination for investments. But because of less money around, FDI may not be as buoyant. Companies with cash should certainly look at Indian companies, he said. Though there may not be many such companies at this juncture, Sovereign Wealth Funds which are cash-rich should look at investing in Indian companies.
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