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Macroeconomic Environment  
A synchronized Global Economic Downturn
Last year the world economy was deeply mired in the most severe financial and economic crisis since the Second World War. With its increasing impact, both in scope and depth worldwide, the crisis posed a significant threat to the world economic and social development. Between September 2008 and May 2009, the market capitalization of banks in the United States of America and Europe declined by 60 per cent (or $2 trillion). While the crisis originated in developed countries, which were also leading the economic downturn, developing countries were also being hit hard through capital reversals, rising borrowing costs, collapsing world trade and commodity prices, and subsiding remittance flows.
Signs of Recovery

The global economy exhibited early signs of end of the recession with several advanced economies recording modest positive growth in the second quarter of 2008-09, while the pace of contraction in output declining significantly in others. The pace of global recovery, however, continues to be uncertain, given the fact that the recovery is still gaining support from the unprecedented stimulus measures amidst persisting stress in the financial systems of advanced economies. After successive rounds of downward revisions to the 2009 growth outlook from 3.9 per cent in July 2008 to -1.4 per cent in July 2009, the IMF for the first time, revised the growth outlook upwards to -1.1 per cent in October 2009.

Different economies are at differing points of the cycle. Although advanced economies continue to be in recession with a growth forecast of -3.4 per cent, the emerging and developing economies are forecast to grow by 1.7 per cent during 2009. Emerging Asia is leading the global rebound, with significant acceleration in growth in the second quarter in China, Hong Kong, Singapore, India and South Korea. In China, GDP growth is estimated to have further accelerated to 8.9 per cent in the third quarter, supported by the substantial fiscal stimulus and rapid increase in bank lending. GDP growth in other Asian emerging-market economies has also strongly recovered, partly in response to policy stimulus.

Source: World Economic Situation and Prospects, 2009 (United Nations)