Third Roland Berger scenario study on how the economy will develop
Despite uncertainties in forecasting, the V-shaped scenario remains the most likely course for the economic crisis
CEO Professor Burkhard Schwenker presented his latest estimates for the development of the global economy in 2010 at the end of January in Frankfurt. Current forecasts support Roland Berger's two previous economic scenarios, which had predicted a V-shaped recovery as early as fall of 2008. For this year, the prospects for recovery have improved considerably. Schwenker also said, "We have identified seven key criteria that determine which scenario is the most likely – and indicators in almost all areas point to a rapid economic recovery."
The economic forecast issued today by Roland Berger Strategy Consulting is the third such analysis since the crisis began. The first two scenarios had already pointed to the likelihood of the V curve – a view that ran counter to the majority of forecasts at the time. "While it's true that, back in November 2008, we underestimated the fierceness of the recession, what we definitely got right even then was the buoyancy that would drive a recovery, especially the dynamism of the Chinese economy," Schwenker said in Frankfurt. "And in our second forecast in April 2009, we identified the milestones and turning points that would determine the likelihood of a V curve."
He warns, however, that "Confidence in the indicators and forecasts remains difficult. The ongoing upturn on the world's stock exchanges is undoubtedly being driven just as much by cheap money as it is by genuine confidence in the data on fundamentals."
Macro-economic models have failed – Sound judgment is called for
Complex cyclical forecasting models failed to predict the forthcoming downturn. So why should they now be able to offer a reliable map of the upturn? Schwenker agrees: "We must accept that we can no longer trust the figures and, above all, the projections. There are no reliable trends which lay down a clear direction and relieve us of the need to make our own decisions. Rather, what we need now is good judgment – supported by the ability to interpret the movement of the seven most important parameters for economic development." In addition to what happens to the growth drivers US, China, India and Russia, key parameters include the possible shift toward protectionism, knock-on effects of the global stimulus programs expire, the approach taken by monetary policy, the development of prices on raw material markets, impacts of regulation on financial markets and the stability of the labor markets.
"The crisis has shown that we must have the courage to make up our own minds," says Schwenker. "The V-scenario describes the most likely course of economic recovery. We expect the economy to pick up as we go forward through 2010." And he adds, "If we learn the right lessons from the crisis, the decade ahead could bring genuine, sustainable prosperity for even broader areas of the world. This could mean that the way out of the crisis actually reinforces Germany's and Europe's inherent strengths. Why? Because industrial skills now count for something again." Germany is excellently placed on this score, with industry accounting for 24% of its economy. The figure for continental Europe too is strong at around 18%, compared with just 14% for the US and less than 10% for the UK.
"Just one and a half years ago, the world was speculating not only about the depth of the recession, but even about a complete collapse of the system," Schwenker sums up. "Today, we now know that the world economy has proved to be relatively robust, a systemic collapse has not occurred. There are, therefore, plenty of reasons for optimism."
CEO Professor Burkhard Schwenker presented his latest estimates for the development of the global economy in 2010 at the end of January in Frankfurt. Current forecasts support Roland Berger's two previous economic scenarios, which had predicted a V-shaped recovery as early as fall of 2008. For this year, the prospects for recovery have improved considerably. Schwenker also said, "We have identified seven key criteria that determine which scenario is the most likely – and indicators in almost all areas point to a rapid economic recovery."
The economic forecast issued today by Roland Berger Strategy Consulting is the third such analysis since the crisis began. The first two scenarios had already pointed to the likelihood of the V curve – a view that ran counter to the majority of forecasts at the time. "While it's true that, back in November 2008, we underestimated the fierceness of the recession, what we definitely got right even then was the buoyancy that would drive a recovery, especially the dynamism of the Chinese economy," Schwenker said in Frankfurt. "And in our second forecast in April 2009, we identified the milestones and turning points that would determine the likelihood of a V curve."
He warns, however, that "Confidence in the indicators and forecasts remains difficult. The ongoing upturn on the world's stock exchanges is undoubtedly being driven just as much by cheap money as it is by genuine confidence in the data on fundamentals."
Macro-economic models have failed – Sound judgment is called for
Complex cyclical forecasting models failed to predict the forthcoming downturn. So why should they now be able to offer a reliable map of the upturn? Schwenker agrees: "We must accept that we can no longer trust the figures and, above all, the projections. There are no reliable trends which lay down a clear direction and relieve us of the need to make our own decisions. Rather, what we need now is good judgment – supported by the ability to interpret the movement of the seven most important parameters for economic development." In addition to what happens to the growth drivers US, China, India and Russia, key parameters include the possible shift toward protectionism, knock-on effects of the global stimulus programs expire, the approach taken by monetary policy, the development of prices on raw material markets, impacts of regulation on financial markets and the stability of the labor markets.
"The crisis has shown that we must have the courage to make up our own minds," says Schwenker. "The V-scenario describes the most likely course of economic recovery. We expect the economy to pick up as we go forward through 2010." And he adds, "If we learn the right lessons from the crisis, the decade ahead could bring genuine, sustainable prosperity for even broader areas of the world. This could mean that the way out of the crisis actually reinforces Germany's and Europe's inherent strengths. Why? Because industrial skills now count for something again." Germany is excellently placed on this score, with industry accounting for 24% of its economy. The figure for continental Europe too is strong at around 18%, compared with just 14% for the US and less than 10% for the UK.
"Just one and a half years ago, the world was speculating not only about the depth of the recession, but even about a complete collapse of the system," Schwenker sums up. "Today, we now know that the world economy has proved to be relatively robust, a systemic collapse has not occurred. There are, therefore, plenty of reasons for optimism."
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