The Impact of the Recovery Act on Economic Growth

Main Points

The world economy is experiencing a modest recovery after near financial collapse this spring. The strength of the recovery varies sharply around the world:

1. In Asia, real GDP growth is returning quickly to precrisis levels and while there may be some permanent GDP loss, the real economy appears to be clearly back on track. For next year consensus forecasts have China growing at 9.1 percent and India growing at 8.0 percent; the latest data from China suggest that these forecasts may soon be revised upward.
2. Latin America is also recovering strongly. Brazil should grow by 4.5 percent in 2010, roughly matching its precrisis trend. We can expect other countries in Latin America to recover quickly also.
3. The global laggards are Europe and the United States. The latest consensus forecasts are for Europe to grow by 1.1 percent and Japan by 1.0 percent in 2010, while the United Sates is expected to grow by 2.4 percent (and the latest revisions to forecasts continue to be in an upward direction). Unemployment in the United States is expected to stay high, around 10 percent, into 2011.

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