The U.S. economy will continue its downward spiral--impacting corporate travel--through 2009, and several European countries are already in recession, but a global recovery and potentially strong growth are expected by 2010 and 2011, said Global Insight chief economist Dr. Nariman Behravesh at an Association of Corporate Travel Executives conference in Rome last week.
"We don't expect a global recovery until 2010, so just to be clear, 2009 will be worse than 2008, but 2010 should be better in the sense that we'll get some bounce back," said Behravesh. "The U.S. economy is probably already in a recession, and we are expecting to see worse growth at least at the end of this year into next before the economy recovers."
Taking an optimistic view of the U.S. economic situation, Behravesh said U.S.-based companies now facing negative profit growth domestically are experiencing quite the opposite internationally. He expected that corporations would not cut international travel as much as domestic travel, although a temporary slowdown is still on its way.
Perhaps the biggest international surprise, Behravesh noted, was Europe's "very weak" second-quarter economic growth figures, which were negative while the United States grew by 2.8 percent.
"With European growth, clearly the numbers are looking bad. All of the data coming out is quite problematic," said Behravesh. "A number of economies are already in a recession: U.K., Italy, Spain ... I suspect that it will be very tough, for example, for Germany to avoid a recession in this type of environment with the U.S. and the U.K. being hit with a recession, where they rely very much on exports."
Behravesh said the travel industry can expect to see some relief on energy costs, though perhaps only temporarily. He expected the per-barrel price of oil to drop to as low as $85 (it actually fell below $80 this week) and then rise again to around $100. "Oil prices have been coming down, and actually they will probably come down some more," he said. Though there may be some relief on oil, "the prices are still going to stay high mostly because of the very strong demand that is coming from the emerging world."
"The good news/bad news on the cost side is that there will be relief in terms of energy, but the negative side, is there will be a lot of pushback on corporate travel," Behravesh continued. "But inflationary pressures worldwide are coming down--very low in the industrial world and higher in the emerging world. In the industrial world, inflation is really not a problem despite there [being] a lot of talk about it. It's sort of a nonissue.
"We're starting to see some leveling off of travel prices," he added. "The actual prices are volatile, but if you smooth them out in the sense of looking for trends, already we sort of have an inflection point and I suspect we're going down."
Behravesh warned against comparisons between the current slowdown and the Great Depression, and blamed the financial press for being "in the eye of the storm" and "taking a bleaker view." During the Great Depression, bailing out the U.S. economy cost taxpayers an estimated 50 percent to 75 percent of gross domestic product, as opposed to this recession where the "extreme estimate" is about 6 percent of GDP, according to Behravesh.
"It is also important not to get too carried away with the doom and gloom," he said. "It is important not to lose sight of the longer-term dynamics of the global economy. We do believe globalization will continue not because of anything other than the inherent dynamism in the global economy and the very powerful market forces that are driving it."
Asia-Pacific and the Middle East are expected to emerge from this financial crisis relatively unharmed, although their high growth rates may be tempered, Behravesh said. Japan's economy, however, is vulnerable to outside forces because of its dependence on exports.
"The good news is that Asia, China and India will be able to avoid a terrible scenario because they are starting off with very high growth rates. A fair amount of their growth is domestic-led in the sense of consumer spending internally, investment spending and so forth. China, of course, depends a lot on exports--India less so--but [they] should be able to survive this downturn, I wouldn't say intact, but better than most," said Behravesh. Other emerging markets that are expected to perform reasonably well include Brazil and Russia, which, like China and India, also have high-growth "buffers" in place, he added.
"Longer term," said Behravesh, "I would be very optimistic about the economic growth around the world and about corporate travel."