Before presenting my 2009 forecasts I will review my 2008 forecasts. They are grouped into three categories.


  • USA will have first female or black president, which will mark a beginning of the new era in world politics
  • European Union will continue its “destructive creation”, which stands for million internally contradictory actions and lack of strategic direction.

Partly right / partly wrong

  • Oil will break through 100 dollars and will approach 200 (after a series of bad climate, politics, accident, positive growth surprises news)
  • Asian and Middle East SWFs will continue shopping on a large scale, with particular focus on depressed western finance sector, energy sector, new technology
  • Oil exporting states and China will create special funds to “buy” best western minds (finance, engineering, biotechnology, knowledge management, etc.)
  • USA and China will embark on the first giants’ duel, and the testing field will be Iran (Chinese investments in energy sector versus Israel political interests)
  • Knowledge blogs will replace newspapers as the most reliable source of knowledge and information
  • Following Israel some 20-30 emerging market countries will produce intellectual capital reports, which will lead to better strategic decisions.


  • Agflation will hit real bad. Our grandchildren economists will make Ph.Ds comparing monetary policy reactions to oil price shocks (oilflation) in 1970-80s to the monetary policy reaction to agflation in 2007-2009 (or even 2010).
  • World growth will remain much stronger than most people expected in late 2007, globalization of business processes made world economy much more resilient to shocks
  • Emerging markets will continue to outperform core markets, China will soar (!!!) as more and more funds will reallocate to China to reflect long-term geopolitical shift from US_Europe to China
  • China IPOs will remain world highest, and will be higher than expected

It turned out that 2008 outcomes were very far from my expectations. Until mid-2008 majority of my forecasts were “in-the-money” but then the financial crisis shock hit much stronger than anticipated and the world economy bubble popped. I still think that my 2008 forecasts are fundamentally correct and once the credit crisis shock wears out the fundamental processes will produce strong Asia, strong soft and hard commodities.

Forecasting 2009 is very difficult. On the one hand leading indicators suggest that we are about to experience a very severe global recession. US consumer sentiment and Japanese business sentiment are at lowest levels for decades, banks are planning to reduce credit supply even further in 2009, the world monetary policy is approaching the zero bound which leaves only exotic policy options for policy-makers, truly uncharted global waters. On the other hand world governments and central banks have already pumped more than 11 trillion dollars (including guarantees) to reduce the credit crisis impact on the world real economy and at some point in the future, when this money will start moving around the globe the growth recovery and inflation will emerge. So forecasting 2009 is really about timing of the turning point. Some economists see it in 2009 (second half), some in 2010, some expect 5-10 years of global stag-deflation.

Now my black cat (in reality Nelson is grey with black stripes) and my crystal ball are ready, let’s get those forecasts rolling. First global then Poland-specific.

My 2009 forecasts

  • Crisis and recession.

All large industrialized countries will be in recession, with US facing the biggest output drop among large economies amid largest past excesses. Hard economic data will be very gloom for the entire 2009, but leading indicators will begin to flash a possibility of mild recovery here and there in 2010. But I do not expect a linear sequencing, there will be premature hopes and continued negative surprises, which will be reflected in major stock exchanges performance. Brace for continued rollercoaster rise, but this time around there will be both, sharp ups and downs. Global inflation will remain very low, dangerously low in some places in 2009, before it shows its ugly face again in 2010, 2011 at the latest.

  • Obama xiānsheng **(先生,which is Chinese for Mr, Sir)

In line with IMF and Paul Krugman recommendations new US administration will embark on a massive spending plan, worth much more than one trillion dollars. On the international arena we will see a major breakthrough regarding US international initiatives. US will no longer act and the global policeman, or global policy agenda setter. It will become global policy agenda facilitator, bringing new global players together, and most notably China. There will be few dangerous places in the world in 2009, think of Palestine and Jewish-Arab conflict, or India-Pakistan affair. This sets the stage for more intense terrorist activities, which may constrain US president foreign policy options.

  • Protectionism

With global growth faltering politicians in many countries will embark on protectionist path (import tariff on cars in Russia, broad import tariffs in Ukraine, import tariffs on steel in India already imposed in 2008). This will be very dangerous and can lead to a prolonged global recession. Combating protectionism will require major international diplomatic effort and understanding that free trade is one of the most important global public goods.

  • New Bretton Woods / New G??

2009 will possibly become a milestone in forming new global governance structure, although the process will be long and last years if not a full decade. IMF will not be endorsed as a global stability supervisor unless major governance changes take place and BRIC countries receive more voting power. It is also unsustainable to have all head offices (IMF and World Bank) in Washington. With videoconferencing broadly available there is now room to relocate IMF/WB head offices to Europe and Asia. Such a move could indeed increase the odds of transforming outdated Bretton Woods governance model into a new one, that reflects 21st century power structure. Consequently the old G7/G8 group should be replaced by new G8, with European Union having one seat. First informal meetings in such company may already take place in 2009.

  • Dollar

In 2009 dollar will begin its long term journey, once travelled by the British pound in early 20th century.

  • Climate change

2008 was a relatively good year, with relatively few climate disasters (UPDATE: according to Munich Re report 2008 was a terrible year regarding natural catastrophes, taking away some 220,000 lives, despite the fall in overall number of disasters by 22 percent to 750). However there is strong rising long-term trend of climate disasters, and if 2009 is just an average year we will see much more adverse climate than in 2008. This will speed up climate change politics, with US joining EU efforts to reduce greenhouse gasses emissions. Carbon emission rights trading will become the next big market and despite global investment recession, investments in renewable energy will go up and then will soar in 2010 with returning high energy prices.

  • Commodity prices and Russia

2009 will be a recession year so commodity prices will remain low, reducing investment in traditional energy (oil in particular). With global energy demand recovering in 2010 this capacity constraints will begin to bite and oil prices will rise, possibly sharply. I think that this rise will take place in 2010, if recession is longer than in 2011. In such scenario Russia will continue to experience capital flight in 2009 and one cannot rule out that it will lose most of its 450bn currency reserves and will need IMF help again (or a loan from China?). 1998 déjà vu.

  • European Union / Euroland

Scary times. With Germany shrinking as much as 3 percent in some scenarios European Union and Euroland will face a once in a lifetime test, a survival test when it comes to European solidarity.  While Iceland, Denmark and even UK sends smoke signals to join using shortcuts, the real question is how European politicians will behave when truly hard times come, when deep recession and unemployment bite. We have already seen Berlusconi “buy Italian” campaign. 2009 will witness Mr Populist vs. Mr Economist, 12-round, heavyweight fight.

  • Poland’s strategy

By now ruling politicians understood that economic misery will last longer than one year and that 2010 may be more difficult than 2009. Prime Minister Tusk will run for president in 2010, so economic gloom may severely inhibit his chances to replace Kaczynski at country top post. It bodes well for government anti-crisis activity, as always when political incentives are right then economic and reform miracles can happen. So expect rapid implementation of government anti-crisis plan, with a lot of help offered for firms which will be deprived from access to bank credit. However, with fiscal picture rapidly deteriorating  Poland will likely delay its decision to join ERM2.

  • Poland’s growth outlook

My central forecast is 2- growth in 2009, and 1+ growth in 2010, conditional on government acting quickly and decisively. Exports and investments will decline in 2009, and private consumption will slow, despite tax cuts. Consequently government spending will have to go up, geare towards building hard and knowledge infrastructure, very needed and long overdue investment in the country future. If done well may keep Tusk as prime candidate for president, if done badly may cost him political future.

  • Poland’s politics in 2009

While European Parliament elections in 2009 (4-7 June) will be a political non-event in Poland, I see a large likelihood that some important political processes will begin in 2009 and accelerate in 2010 before presidential elections. Firstly, the young generation (people who started their adult professional life after 1989) will have a stronger voice in Polish politics. Will they form their own party and score well in 2010 (president elections) and 2011 (parliament elections), it is still a tough call. But three things indicate that it can happen: (1) economic gloom and doom in 2010 will make people unhappy about the ruling party; (2) Obama way of winning, using internet and social networking shows that young, open minded, globally-minded generation can and should replace older layer, which is busy fighting yesterday wars that nobody understands.  Thirdly look at the following questions. Why after 20 years of reforms Poland is a laggard in global competiveness ranking, it fell last year from 68th to 76th place. Why after 20 years of reforms we still do have decent roads and railway tracks? Why Poland scientific output places us next to Albania at times when knowledge and innovation determine country future standard of living. Why at times when internet access is key to success, Poland has the highest digital exclusion rates in Europe? The why list is very, very long.

Who can do it? One obvious candidate to lead young generation is Rafal Dutkiewicz, president of Wroclaw. Lech Kaczynski has catapulted himself from Warsaw president to Poland’s top job, so it can be done. But Polska XXI was a false start, new opening cannot be done with old pricks. So unless Dutkiewicz rethinks his strategy, he is no challenge to Tusk.

To sum up, we face a very challenging year, globally and in Poland. I listed above many known unknowns, there are also many unknown unknowns, regarding war, politics, disruptive innovations, social developments. I wish all my blog readers to do well in such a challenging environment. The best personal strategy for 2009 is to avoid excessive financial risk and invest in one’s intellectual capital. Happy New Year.

Your comments on my 2009 forecasts are warmly welcome.


Here is a link to Financial Times 2009 predictions.

And here is a link to Nouriel Roubini 2009  predictions.

And here is a link to Dani Rodrik 2009 predictions, one about China draws attention.