India, China to post 6-8 pc growth: Canadian report

The global economy is turning the corner and India and China will lead the world out of recession, said a Canadian economic report on Wednesday.

The report called Economic Directions by Scotiabank, the second largest Canadian bank with operations in about 50 countries, said in this new environment emerging markets will provide a large share of global locomotion.

"Even in a year when global output is shrinking by nearly three per cent, China and India are expected to expand by six to eight per cent in 2009," said Scotiabank chief economist Warren Jestin.

The report said China will be "at the vanguard of nations starting down the road to recovery, with the US appearing to be in the pole position among major developed countries."

The Scotiabank chief economist said: "In the US, massive monetary and fiscal stimulus is beginning to gain traction and will account for the majority of growth during the next year."

He said, "Government initiatives are bolstering disposable income and spending at a time when households are focusing on reducing debt and rebuilding savings.

"Monthly job losses appear to have crested and confidence surveys suggest that consumers and businesses are becoming less negative about current conditions and cautiously more optimistic about prospects for the balance of the year."

The report said automakers are also restarting plants as auto sales have started to recover. US housing activity also has bottomed after three years of decline, although prices remain depressed because of large volumes of distressed sales and unsold properties, it added.

"While the convergence of government stimulus and inventory rebuilding will boost economic performance in the months ahead, US growth through 2010 will do little more than backfill the hole created by the recent steep decline in activity," Jestin said.

He said: "It will take longer to reverse the 22 per cent drop in US household net worth since mid-2007, to revitalise housing and to restructure the financial services and motor vehicle industries."

According to the report, the European and Japanese economies also are showing signs of turning the corner. With the exception of the UK, they have not suffered the "seismic shocks that have reverberated through the US financial system", the report said.

But their recent GDP losses won't be recouped until beyond 2010, it said.

However, financial markets will remain volatile during this "uneven and protracted global convalescence", the report said.