<p>Citi's global econ outlook 2009</p><p>KEY POINTS</p><p>On growth…</p><p>·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Plunging asset prices have sharply reduced global wealth…resulting in not only a drop in consumer/business confidence but also losses for financial institutions…which limits their ability to support the economy. As a result, industrial countries are likely to contract well into 2009. </p><p>·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Emerging markets are likely to experience the most significant slowdown since 2001….the reason being&nbsp; that the road ahead is likely to get rockier even after the global recession has been weathered. This is due to the fact that global capital flows and financial intermediation are likely to be more regulated and liquidity more dear…which will result in in higher intermediation costs and less invst.&nbsp; (see pg 48 for EM fcts)</p><p>·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Prospects for China in 2009 will be keenly watched…our team expects that growth will likely hold over 8% due to the fiscal stimulus, the govt's strong political will and its capability in mobilizing resources.</p><p>·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; All this will result in global growth being below trend in 2010. (see pg 55 for LT forecasts)</p><p></p><p>On the policy front…</p><p>·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; As inflation is collapsing, monetary policy is expected to ease further in many countries, with a number of key central banks, including the Federal Reserve, implementing “unconventional” policies. (See pg 14 for what can be done). </p><p>·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Our team also expects significant fiscal stimulus…and while aggressive government intervention has stabilized major financial institutions...the core of the global financial system still remains under severe stress…as a range of financial intermediaries face ongoing pressure to shed assets.</p><p></p><p>On FX…</p><p>·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Our team expects further weakening of the EUR against the USD. The yen is likely to continue to appreciate against the USD in the face of ongoing economic and financial uncertainty. </p><p>·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Most emerging market currencies should remain under pressure until the outlook for global risk appetite returns. (see pg 56 for LT forecasts)</p><p></p><p>Finally on India …</p><p>·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; We expect growth to decelerate to 5.5%. This incorporates a contraction in exports and a deceleration in both investments and consumption and a minimum 200bps easing of rates. We expect the rupee to remain weak in the near term.&nbsp; </p><p></p>

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