Global Economy En Route to a Rocky Recovery: Special International Edition

CHICAGO, July 10 /PRNewswire/ -- "I spent the better part of the last two
weeks talking with economists from around the world. Although the content of
those meetings is confidential, I can share my general conclusions about what
the meetings suggest about the state of the global recession, the outlook for
financial markets, and the world that we are likely to see emerge on the other
side of the crisis," says Diane Swonk, chief economist of Mesirow Financial,
in her special international edition of Themes on the Economy, located at:
http://www.mesirowfinancial.com/economics/swonk/themes/themes_0709.pdf

"The dollar is 'the best of the worst' as a reserve currency and will, as a
result, remain a reserve currency (and provide the U.S. with the privileges of
that status -- lower real interest rates) for some time to come. Recent
attacks on the dollar as a reserve currency by the Chinese are viewed as
particularly empty, given the negative consequences that moving out of the
dollar would mean for its economy," notes Swonk.
In her July newsletter, Swonk focuses on the economic outlook by region,
prospects for inflation (or lack thereof), the health of credit markets, and
what it all suggests about the future of the global economy:

The Developed World:
-- The U.S. is widely expected to lead the developed economies out of
recession in 2010. Very few economists are optimistic about how fast
the
U.S. can grow in 2010 and 2011, given the hit to credit markets that
we
have endured.
-- Canada. The outlook for Canada is (unfortunately for them) closely
tied
to that of the U.S., as it is our largest trading partner--and trade
has
virtually collapsed.
-- Europe. On net, Europe is not expected to emerge from its recession
until late 2010 or early 2011. France is likely to be out of recession
sooner than Germany. Ireland, Italy, Spain and the UK are expected to
emerge last.

-- Japan ranks last among the G7, with real GDP expected to decline more
than 6% in 2009, but should rebound modestly in 2010. A collapse in
exports--down at a 60% annual rate between the first and fourth
quarters
-- and the collateral damage those losses caused for production and
business investment were the primary culprits.

The Developing World:
-- Latin America has survived the crisis better, and is expected to
emerge
sooner and stronger, than much of the developed world. One reason is
that its banks were more capitalized and less exposed to the credit
losses experienced in the U.S. and Europe. Both core and overall
inflation are expected to remain relatively well-behaved.
-- Both Central and Eastern Europe have been hit hard by the spillover
effects of the recession in the European Union and the collapse in
Russia. Investment in the industrial sector, in particular, has
collapsed. Tourism is also down, from both the East and the West.
-- Asia ex-Japan was hit fairly hard by the financial crisis, with most
economies collapsing with the implosion of global trade. The
exceptions
were China, India, and Indonesia. India and Indonesia were largely
insulated from the crisis because of a lack of credit exposure. The
story on China, however, is more interesting because of its size.
-- Africa is yet another region hard hit by the collapse in global trade.
The exposure to the financial crisis, however, was fairly limited,
which
means that credit markets (wherever they exist) remain functional.
There
is also some offset to the collapse in commodity prices for the more
commodity-based economies via increased investments by China.

-- The Middle East. Plummeting oil revenues coupled with a fairly severe
credit crunch have hurt countries in the Gulf region fairly hard.
Saudi
Arabia is in better shape to weather the storm than the United Arab
Emirates -- tourism in Dubai has held up, but real estate is imploding
with the collapse in energy prices. Iraq is stabilizing, and despite
reports of purchases of Iraq oil by China, the U.S. is still the major
investor in Iraq, particularly in the North.

"The global economy will emerge badly battered but not beaten by the financial
crisis. The worst-case scenarios -- a resurgence in protectionism, widespread
social unrest and political instability (except
in places where we appreciate it, such as Iran) in particular--appear to have
been averted. Even economists in hard-hit economies like those in Central
Europe and Mexico are confident of this. The other side of the crisis,
however, will look very different from anything we have known in the
post-World War II period. The developed economies will have to be more focused
on paying back than accumulating their debts, which will be painful,
especially for economies such as our own, as we have become accustomed to
living well beyond our means. Tighten your purse strings and boost your
saving. We are in for a long haul," concludes Swonk.

The July issue of Themes on the Economy as well as archived issues can be
found at www.mesirowfinancial.com.

Mesirow Financial is a diversified financial services firm headquartered in
Chicago. Founded in 1937, it is an independent employee-owned firm with $30
billion in assets under management and 1,100 employees in offices across the
country. With expertise in Investment Management, Investment Services,
Insurance Services, Investment Banking, Consulting and Real Estate, Mesirow
Financial has consistently met the financial needs of institutions, public
sector entities, corporations and individuals. For more information about
Mesirow Financial, visit its Web site at www.mesirowfinancial.com.

SOURCE Mesirow Financial

Diane Swonk, +1-312-595-7122, or Olga Camargo, +1-312-595-7128, both of
Mesirow Financial