Leading experts see stronger recovery in 2010

Despite further consolidation in economic and financial systems and continued volatility in global markets, 2009 was "a year that showed the first sign of regained optimism and confidence in financial markets," said John Prestbo, editor and executive director of Dow Jones Indexes, which organized the 2010 Global Economic Outlook panel discussion.

A shift in market sentiment has led to more optimistic forecasts for economic growth.

"Two years after the start of a severe worldwide recession, a rebound in global economic activity is clearly underway with industrial production and international trade flows rising briskly," said Kevin Logan, an independent global economist. "By the middle of this year, estimates for global GDP growth in 2010 are likely to be double what they were in the middle of 2009."

But growth is "likely to be unbalanced across the globe," Logan pointed out, with important consequences for capital markets and exchange rates.

Logan said Europe and the United States would be hampered by the ongoing process of deleveraging, by still fragile financial systems and by the gradual withdrawal of policy stimulus.

"In consequence, we are likely to see persistent pressure on the exchange rate system to adjust to unbalanced growth, rising protectionism in trade, the growing possibility of deflation, rather than of inflation, in the advanced economies, and better returns on capital assets -- direct investments and securities -- in the emerging economies," he said.

In contrast with a rising economy, the U.S. dollar will take a different route. Michael Woolfolk, senior currency strategist at Bank of New York Mellon, expected the dollar to first weaken against major currencies through mid-year, and then rally back in the second half, most probably "on higher interest rates."

"By mid-year, the U.S. Fed (Federal Reserve) is expected to lead a coordinated round of monetary tightening among major central banks, which will allow the dollar to recover lost ground and rebuild its tarnished image," Woolfolk said. "The higher U.S. interest rates rise in 2010, the higher the dollar is likely to gain against the major currencies."

In Woolfolk's prediction, the Japanese yen and British pound will be the worst performers this year, due to negative interest rate differentials and the weakest economic performance among the G7; Kazinform cites Xinhua.

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