Economy & Business - December 2007 (ISSN 1741-7430)

This is our final effort at forecasting what will happen in the region in 2007 and our second stab at forecasting what will happen in 2008. We are making these forecasts in mid-December, just after the US Federal Reserve Board cut US interest rates by a quarter of a percentage point. Our view of the global economy is now less bearish than it has been for most of 2007. This is because we think that policymakers have finally recognised most of the looming economic problems they had been ignoring. Central banks and finance ministers in industrialised countries, as well as the world's big banks, have, finally, started to take action on subprime mortgages; the US current account deficit and the Chinese puzzle of simultaneously surging commodity prices and sliding prices of manufactured goods. This action means, at the very least, executives and policymakers have started to estimate the scale of the problems and to take mitigating action.

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