(This article was written on the 1st of July 2009)
The world is taking heart at the faint but steady signs that the economic recession might have bottomed out. The key aspects of the above sentence need to be clearly explained.
There are indeed faint signs of economic regeneration. These signs include the steady rise of oil prices which broke the 70 US $ barrier yesterday. While the rise of oil is definitely not an augur of good times to many countries, especially to us at Maldives where all our energy come from burnt fossil fuels, it is a explicit sign of the optimism for the future.
Additionally, for the first time since late 2007, house prices in UK and US have shown some stability and in fact have registered some marginal improvements in the last month or so. Considering the fact that it was the bursting of the housing bubble in mid 2007 that signaled the start of the global recession, this is an encouraging sign.
Initial growth targets and export volumes of China has been recently upgraded because of better than anticipated results and the Economist reports that the equity market that shuttered its windows are slowly starting to re-open in China.
The World Financial System, accused by many of excesses and the indeed the ultimate source of the greed and short sightedness that destroyed the lives of so many, is slowly bouncing back with markets slowly starting to perform. There are encouraging signs in the bonds and hedge funds too. In fact a Bloomberg article about the gains in the corporate bonds market states that ‘gains may be the clearest indication that the more than $12.8 trillion pledged by the government and Federal Reserve to thaw frozen credit markets is starting to pull the economy out of the worst recession since the 1930s.’
There is no doubt that is good news. But it does not mean that the recession is over. It is good news for the future. About the end of the recession being it sight. In 1942; three years before the end of the Second World War, Winston Churchill famously said, ‘This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.’ The present indications of the better times to come need to be accepted in a similar spirit.
There is still need and absolute must for us here in the Maldives to be cautious and careful about our economy. The ills that have befallen our economy have several unique features that require strict attention and home grown solutions. A resilient world economy and signs of growth will not automatically solve those issues. There is no doubt that a return of tourists and inflow of foreign capital will do much, to solve temporary hurdles. But there are also deep and chronic issues embedded into the very system of our socio-economic life. Solving these will be more difficult and will take courage and fortitude.