So, on the face of this good news, let's have a recap on which of the world's major economies have now officially exited recession and which are still languishing in recession:
Out of recession (or never in recession): Australia, Brazil, Canada, China, France, Germany, India, Japan, United States.
Still in recession: Italy, Russia, Spain, United Kingdom
It is definitely a good sign for the global economy that more and more nations are reporting that their national recessions are at an end, indicating that the Great Financial Crisis as a whole is also coming to an end.
Of the G8 nations, it was Canada that first reported growth back in July, which was surprising considering how dependent and interlinked the Canadian economy is with the economic performance of its bigger neighbour down south. But, on the plus side, Canadian banks are known to be ridiculously frugal and thus were not as seriously endangered due to risky and toxic investments as banks in other leading industrial nations were. The Bank of Canada has not had to bail-out any of Canada's national banks.
Brazil, India and China, three of the "BRIC" emerging economies have seen growth at an impressive rate, indicating that they indeed will be three of the most influential economic heavyweights of the 21st century. China's performance - unsurprisingly - is the best, with figures expected to surpass the 8% growth rate that the Chinese Government sets as a yearly minimum target. But, one is concerned about how much this is down to the enormous stimulus package Beijing began at the end of last year, which amounted to $586 billion.
France, Germany and Japan's exit from recession in the second quarter was unexpected and heartily welcomed but the status of their economic recovery remains uncertain - respectively, France and Germany reported growth of 0.3% and Japan 0.9%. Japan's economy was buoyed by a recovery in its vital export industry, which in turn was due to China's recovery. The sustainability of a Japanese recovery is in doubt though due to very low levels of domestic demand and consumption. The exit from recession is great news for the new government of the Democratic Party of Japan (DPJ), but unless there is a sustainable recovery, I fail to see how the DPJ can fulfill its manifesto promises of increased public spending and welfare reform. Germany's new government, led by the re-elected Angela Merkel and comprising her CDU and the junior coalition partner, the Free Democrats have announced tax cuts of up to 24 billion euros in the hope of stimulating the economy by stoking domestic demand and consumption. This is a recognition that the German economy can no longer rely on being an export-led economy. In France, the return to growth is one of the only good things to report for Nicholas Sarkozy's scandal-hit government, scandals including charges of nepotism concerning Sarkozy's son and the admission of a gay minister that he paid for sex with boys in Thailand.
The United States coming out of recession is fantastic news - but like China, there are fears that this growth is merely artificial growth due to President Obama's enormous stimulus package. The stimulus is due to end shortly and the test for the US economy will be whether it can create natural growth without the need for government stimulus spending. Like many other battered economies leaving recession, the US economy's two biggest challenges are an enormous government deficit and lingering unemployment, at around 9%.
That leaves Italy, Russia, Spain and the UK as the last major economies to still be contracting. Russia was badly hurt by the drop in world commodity prices, which indicates that the Kremlin has to begin reforming Russia's corrupt, archaic economy to enable it to become more diversified and services-led or Russia's bid to become a major world power again will be in doubt. Spain has the highest unemployment rate in the entire EU (nearly 20%) and its recovery will be the most painful out of all EU nations - my personal belief is that Spain won't see growth until at least the second half of 2010. The UK disappointingly failed to exit recession in the third quarter of this year, but there are hopes that it will return to growth in either the last quarter or first quarter of 2010. Regardless of this, Labour is still expected to be heavily defeated at the next General Election. Italy is also expected to grow in 2010, but its economy is also in desperate need of deregulation and a cut in public spending, due to Italy having the highest public deficit of any industrialised nation. With Berlusconi at the helm, this is not going to happen anytime soon.
In summary, promising news for all of us, as it seems the world economy is on the move again. But there's still an awful lot of work and probably some more pain still to come.
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