While 2009 might be behind us, the pain of the recession is likely to linger.
As 2009 ended, the UK was emerging from one of the longest and deepest recessions in post-war history. In the six consecutive quarters of falling output since the early months of 2008, UK GDP had contracted by a total of nearly 6%. And the downturn was synchronised across the world, knocking around 5% off GDP across the G7 and eurozone economies.
Financial markets, however pose the most significant risk. The initial response to the crisis may have been a collaborative one, but the recovery will pull economies in different directions which could leave the global economy vulnerable to further shocks. The timing and pace of tighter monetary policy and fiscal consolidation will also be central to global economic prospects.
Consumers were the driving force behind the UK economy for much of the past decade. A strong holiday shopping season could give way to austerity...but it all depends on whether consumers go back to business as usual or pay down debt and rebuild savings. Credit constraints and a slow recovery in profitability are also likely to hold back business investment.
The best prospects for growth look set to come from exports – supported by an upturn in world trade flows and a weak Sterling exchange rate. That said, the global economic recovery has not fully taken root with the most acute risks remaining in the financial sector.
An export-led upturn is, therefore, not assured. Companies will therefore need to be agile in responding to what is likely to be a bumpy road out of recession over the next twelve months.
It's a gloomy outlook for the start of the year, but hopefully the spring will bring warmer weather and a thaw in the economy.