50 years from the start of record keeping in 1960, because the economies worldwide are slowing down following major industrial countries. It is expected to hit the bottom in the third quarter of 2009. However, all this depends on the effectiveness of the economic stimulation measures taken by each country, those already launched and those to be issued, especially the measures issued by the leading country like the United States under the administration of the new President Barack Obama. There are still many risk factors pressuring the economic recovery. The key issues are: 1. Sub-prime Problem A new round may ignite as there are still a large number of financial institutions that suffer losses from investment in the sub-prime markets. In addition the acute economic slowdown could lead to increasing NPLs. When debtors’ business faced marketing problems, slacking production and employment followed and consequently financial institutions will end up with low-quality debts. 2. Oil Prices In the first half of the year oil price may rise from such very low levels since the OPEC is trying to control production volume. In the early part of 2009, oil production has been cut by 2.2 million barrels/day and is anticipated to cut further to retain the prices deemed appropriate. 3. Limited Economic Stimulation Measures Since leading economies especially the United States and Japan implemented unrestricted monetary policy in the prior year reducing the interest rates to nearly 0 percent, this measure could no longer be used to boost liquidity in the financial sector again. Meanwhile, the fiscal measures used in stimulating the economy took a toll on the fiscal positions of the countries especially the United States that have encountered chronic twin deficits and Germany that experienced large budget
deficit exceeding the EU agreement for several consecutive years, as well as Japan whose public debts score higher than 50 percent of GDP. 4. Unemployment Problem As several corporations faced plunging sales, employment will be seriously affected so much that they had to down size their employees continuously from the prior year. This, apart from giving direct impact on private sector spending, may cause social problems as well. Hence, the government of each country has to allocate resources to resolve such problems and could not be fully utilized to stimulate the economy. 5. Hard-to-Control Factors Increasingly severe global warming has caused drastic changes in climatic condition and natural catastrophes incurring losses to lives and properties such as earthquakes, hurricanes and tsunami tidal waves as well as terrorism and internal and international political conflicts. All these factors will hinder economic solving, making the task slower or more difficult.
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