Tough going for global economy in 2009?

The global economy continues to grow for the fifth year in succession and this trend will probably continue up to 2008 but there are risks that point towards a tough 2009, said Prof. Norbert Walter, Chief Economist, Deutsche Bank and Managing Director Deutsche Bank Research.

He was addressing a seminar on "World Economic Cycle Mature Financial Markets Nervous?" last week organised by the Duetsche Bank in Colombo.

Prof. Walter said all emerging markets have contributed to the global economy which has been on a steady growth path over the years but there would be a negative economic growth in 2009.

"Both central bank interest rates and bond yields seem to have reached a plateau. The US housing recession has not yet affected other economic sectors and has only slightly dampened the US economic growth. All regions of the world posted a solid GDP growth in 2003", he said.

He said all emerging economies are on a growth path and have undertaken several key development initiatives such as building ports, airports, highways and other major infrastructure facilities.

Small Asian economies and particularly Japan are gaining from the tremendous growth in India and China. Emerging market economies such as India and China are experiencing strong export-led growth implying a large increase in foreign exchange reserves, he said.

China's economy will benefit immensely next year due to the Olympic games but there will be a slow down in the growth rate due to environmental concerns. China has come under severe criticism to reduce the emission of green house gases that leads to global warming.

Prof. Walter said that he was less optimistic about Sri Lanka's economic growth in 2009 due to the depreciation of the rupee and other vital issues that need to be addressed.

LF