The lead-off story this week again comes out of the Economist Intelligence Unit and pertains to the ongoing status of Globalization... their analysis indicates that the current crisis will have a marked impact on the global business landscape and that the previous levels of growth, market liberalization and infrastructure investment will reach a period of stasis, if not actual retreat... the glimmer of hope is in the Emerging Markets where the starting point for Globalization was markedly lower... openness and continued reform seem likely to continue albeit not at the previous pace.
CNNMoney takes a somewhat more bullish attitude in their view of Emerging Market Growth... they contend that 70% of polled global money managers are now expecting global economic improvement over the course of the coming 12 months and that this is to be driven by Emerging Markets...retrenching, status quo or forward movement? The Morgan Stanley Capital International Emerging Market Index reportedly supports the majority money manager view... aside from the implied stock market impact, what does either stasis or moderate growth mean to the Consumer Markets in Emerging Countries? Are these markets in a position today to continue the process of infrastructure build supporting good and fair lending practices? Who is going to do it and from where will the resource come?
CNNMoney continues with another piece on a related topic...Expenses... banks are looking everywhere to cut expenses and reduce costs... they are trying to prove that they are not recklessly spending but will they go too far with more layoffs, asset sales and refusal to build & maintain infrastructure? The search for short-term remedies may put them in untenable situations vis-a-vis the ability to take advantage of circumstances presented when inevitably the economic rebound begins... where is the expertise going to be when the realization strikes that processes and support mechanisms are not current?
How long and how bad? The cost cutting and refusal to move forward is significantly impacted by the longer-term view... "recessions caused by financial crises have a history of being long, deep and difficult to fully escape"...so reports Reuters in their view on the likelihood of a US recession 'Double-Dip'...following the end of the government stimulus support, any number of 'shocks' could bring about another reversal...even so, growth in the US economy is expected to be a tepid 0.5 to 1.5%, at best, for up to 3 years...how far behind will we fall in our consumer markets in that amount of time and what will it take to recoup?
And then there is the beleaguered Emerging Market viewpoint... the current coalition government in Thailand espouses..."a return to economic growth in the fourth quarter despite GDP shrinking 7.1% ... its biggest decline since the 1997-98 Asian Economic Crisis...". The government has proposed $41B in infrastructure investment as well as tax cuts on top of the 2.5% central bank rate cut already handed out... Thai banks are 'expected' to become less risk averse as these proposed investments are made...
The case is clear regardless of the point of view taken - political rhetoric or bearish negativity - when unemployment eases, when the benefits of various stimulus plans begin to be felt, when funding finds its way to the consumer markets...only those who have data, analytic ability, coherent & updated lending policies & practices and sound & tested operational support will be in a position to take prudent advantage of the rebound in consumer confidence and the pent-up demand for goods and services that is expected to follow....who will and will not be ready?
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