Many economists in the West have said they fear a double dip recession which would most likely be fueled by high unemployment and that this joblessness will dampen consumer consumption which is about two-thirds of GDP. Most experts expect the economy in the US, UK, and EU to slow considerably in the current quarter compared to the fourth quarter of last year.
Yesterday, worries about a double dip came from a senior Chinese official for the first time.
China’s premier Wen Jiabao expressed his concern that most developed nations may have trouble increasing their growth rates this year.
The observation may end up being true. The stimulus packages which have been integral to economic improvement in large nations, including China, are likely to be withdrawn this years. In many cases it is because the cost of the programs is raising national deficits at an alarming rates. The head of the IMF has urged large nations to continue spending to support their economies, but, in certain nations such as the UK, that may not be practical because their deficits are so high compared to GDP.
China has every reason to fear another recession. Its exports and factory production have been up sharply since the beginning of the year. If demand for its goods from its trade partners drops sharply, the engine of much of China’s GDP growth disappears.
Douglas A. McIntyre
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