El Blog de MARKETING de GONZALO SAIZ

We have all been speaking and discussing about the crisis for quite a long period of time and now that many influential economists have started to see the first recovery sings, now that the financial markets have been "stable" (plus or minus) for a few weeks/months (compared to the huge turbulances that they have been going through since 2007's summer), it is about time to start the same discussion about the outlook for the next few years. After the crisis, what's next?.

I just discovered a new website from IESE business school and read and article from Antonio Argandoña that focuses on what it is next after the crisis. Here it is (a copy and paste of) the factors that will determine the macroeconomic framework in the near future according to Argandoña professor:

- In the short term, it appears that interest rates will remain low, given the formidable creation of global liquidity by the central banks.

- Spending and public deficit will both increase. Many governments are sacrificing fiscal discipline in an attempt to achieve immediate recovery of aggregate demand. However, these measures will entail medium-term costs, such as costlier credit. Therefore, we expect higher rates in the medium term - which could be quite soon.

- We are unlikely to see a repeat of the growth rates experienced in recent years. In terms of consumption, moderation will be the trend. Families will have to reduce their debts and there will be a greater tendency toward saving. Presumably, the demand for consumer credit will diminish and the real-estate market will be lethargic. Investment will also be more restrained.

- The real-estate, construction and financial sectors, among others, should return to more sustainable levels. The conditions and structure existing in each country, their ability to generate enterprising initiatives and their flexibility in allocating resources will determine which sectors pick up first.

- In the long term, the potential growth rate will be more restrained than when housing was driving the economy, for reasons including increased regulation for the financial sector, a volume of credit that will not grow as it did before, as well as higher interest rates and risk premiums.

- Worldwide imbalances, particularly the disparity between the savings and spending of certain countries, will be reduced, albeit mildly.

- The price of oil will be restored when demand is restored, at which point the supply shortage will be exacerbated. As such, the upward trend of the price per barrel is likely to become accentuated in the future.

- Europe will remain sluggish and the United States will continue to lose clout in the world economy. However, Japan will not likely step into the breach. For that, all signs point to emerging countries, particularly India and China.

- The recession will likely encourage protectionism, interventionism and economic nationalism, which can only prove harmful to the prospects for worldwide growth.

We do not know whether we will suffer another crisis of this magnitude, or what direction will be taken with the new approaches to economic theory still being made up as we go along.

Nonetheless, as Argandoña states, the focus should not be on looking for someone to blame, but rather on introducing the necessary reforms so that a similar crisis does not strike again.