Finance Forecast For 2009

The previous year posed difficult challenges to the banking and investment industries. As the government struggles to salvage what’s left of the economy, a lot of people are hopeful that this year will see better times for the country. Moves by the government to allot funds for addressing the problems leads people to believe the crisis will ease off. Some experts believe though, that there is still the matter of sustainability in terms of paying off debts and job creation.

A Rise in Unemployment

Unemployment rates will continue to rise as businesses continue to take out loans to offset hits in revenue. Also, even as the government has taken steps towards infrastructure programs, it will take some time before these plans take effect. In the meantime, no new jobs are created. Experts project that unemployment rates will reach more than 10 percent by the year 2010.

Investors Continue to be Conservative

Businesses that are known for innovation, sound consumer focus campaigns as well as having steady financial reserves will be stable this year although investors will continue to be conservative in their investments. The main concern for now is pulling through the hard times, as opposed to exploring new markets. While some companies will come up with better products to increase revenues, others will go into mergers to avoid closing down due to bankruptcy.

The Crisis Extends to Countries Overseas

The economic crisis isn’t confined to the United States alone, rather it will continue to affect other countries, most notable of which are:

• Russia
• China
• The Persian Gulf.

Oil and gas prices continue to decline and as a result, the Persian Gulf and Russia will concentrate on local efforts. Investments in the US will be put on hold. China, already plagued with slow progress over the years, continues to experience even lower growth rates.

While these predictions warn us of dire circumstances, there are experts who are optimistic about this year’s prospects. While many people believe that a depression is looming in the distance, some experts say that the situation won’t go that far. They even claim that the economy will start to recover by the middle of the year.

Still, it is best to be conservative before making any moves that involve money such as purchasing a house or putting up a small business. To get a feel of how the economy is doing – if it is indeed, recovering -- people are advised to watch out for three indicators:

• Unemployment

Right now, many are still filing for unemployment but once the numbers reach below 400,000, this is a sign that there might be better times ahead.

• Real Estate

Real estate inventory should be 10 months worth for the industry to be categorized as being in a healthy state.

• Banks’ Lending Behavior

TED rates are a good indication to watch out for. TED is the rate you get when you subtract the interest rates banks impose on each other (on bank to bank lending) from the three month T-bill rates. Once it goes below one percent, then credit prospects are starting to recover.