Ifo: World Economic Climate Improving

November 20, 2009 · Filed Under Countries, Markets

The Ifo World Economic Climate Indicator rose in the fourth quarter of 2009 for the third time in succession. The rise in the indicator is the result of both more favourable expectations for the coming six months as well as less negative assessments of the current economic situation. The recovery of the world economy is driven especially by the dynamic development in Brazil as well as in India, China and other Asian countries.

The economic climate improved in all major economic regions, according to Hans-Werner Sinn, President at the Ifo Institute for Economic Research in Munich. The improvement was particularly marked in Asia, where the indicator even surpassed its long-term average. Also in Western Europe and North America the climate indicator rose clearly in the fourth quarter of 2009.

The economic expectations are now very optimistic almost everywhere, with the exception of several countries of Central and Eastern Europe. In contrast, the current economic situation is still assessed as decidedly unfavourable in all major regions, although these assessments clearly improved over the previous quarter. The appraisals of the current economic situation are particularly negative in the Euro area, North America, Central and Eastern Europe and Russia.

The inflation expectations for 2009, on a worldwide average, are clearly lower than the inflation estimate for the previous year (2.5% compared to 5.4%). According to the expectations of the WES participants, prices will increase only slightly in the course of the coming six months.

The short-term interest rates will increase again in the coming six months for the first time in more than a year, in the opinion of the WES experts. In accord with the more favourable economic outlook, the WES experts anticipate that also the long-term interest rates are likely to increase in the coming six months in most countries.

An increasing number of WES experts regard the euro as overvalued. The other major world currencies, the US dollar, the Japanese yen and the British pound, are now seen as properly valued, on average.

Results of the Ifo World Economic Survey (WES) of the 4th quarter 2009 in co-operation with the International Chamber of Commerce (ICC), Paris, can be downloaded: PDF-file (3 pages)