L-shaped recovery
Australia is one of the best-positioned developed economies ahead expectations of a very slow recovery for the global economy, according to Goldman Sachs JBWere’s chief investment officer Andrew Cooke.
According to Cooke, the global economy is currently in the midst of a moderation cycle and an L-shaped recovery.
“This is where you have a fall then a very slow, gradual recovery, so it’s not a traditional V-shaped. One of the reasons for that is one of the reflating mechanisms or ways the economy recovers is people start lending money,” he said.
“Banks, because their balance sheets have been impaired by the losses, are less willing to lend money and will be for a while.”
Cooke said he expected mounting inflationary pressure to challenge emerging market growth.
“Currently, along with a slowing global economy we have commodity price pressures, which is very unusual,” he said.
“It is impacting emerging markets more than developed markets because they have higher commodity intensity. But this is the first sign of a tax on the emerging markets … but one they can manage quite well.”
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