Crystal ball gazing, 2010 edition

Thu Jan 7, 2010 10:29am EST
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By Emily Kaiser

WASHINGTON (Reuters) - Thanks to roughly $5 trillion in special lending and spending programs, world finance leaders have managed to revive economic growth.

In 2010, the bills may start coming due.

The United States, the euro zone, Britain and Japan are all expected to report economic growth for the final three months of 2009, according to a recent Reuters poll of more than 150 economists. Official figures aren't due for several more weeks, but recent reports on factory activity and world trade point to a stronger fourth quarter.

While the pace of growth may slacken a bit in 2010, most forecasters think it will stay positive in advanced economies. But unemployment is likely to remain uncomfortably high, which suggests already strained government finances will worsen.

That will leave countries with limited resources to step in should the economy falter again. And the rising debt burden is beginning to raise alarms with some economists and investors.

The International Monetary Fund thinks debt as a percentage of gross domestic product will rise in all of the Group of Seven wealthiest countries in 2010, and probably remain elevated at least through 2014.

"The foundation of the global economy remains unstable even if the cracks have been smoothed over and we are all happy to forget what lies beneath the heavy layer of the public sector's liquidity insurance," said Lena Komileva, an economist with Tullett Prebon in London.

Komileva argues that the global economy is in the midst of a "mega cycle of multi-year economic trends" that won't quickly be resolved, even after growth is firmly established.   Continued...