The blog will publish its annual Budget Outlook for 2011 next weekend. And so as usual, its now time to review last year’s Outlook. Past performance may not be a perfect guide to future outcomes. But it is one of the best that we have.
The 2010 Outlook was titled ‘Budgeting for a New Normal’, and it argued that over the next few years:
“We will start to see a rebalancing of the global economy. The West will see lower consumption, as people rebuild their savings, and borrow less. In turn, this will mean lower export demand for the emerging economies. The outcome will be a more sustainable world economy, but it will be a difficult journey.”
Today, this still seems to be an accurate view, particularly the sense that it will be a “difficult journey“.
The blog’s 2008 Outlook ‘Budgeting for a Downturn’, and its 2009 ‘Budgeting for Survival’, meant it was one of the few to forecast the Crisis. Last year, however, the blog was more positive about the outlook than most forecasters, expecting that “2010 should be a better year for the chemical industry, as demand grows in line with a recovery in global GDP“.
It also correctly balanced this optimism by warning that there would be no “quick V-shaped return to the 2003-7 Boom years“, and suggesting that:
“Governments will worry about budget deficits, and may well scale down support for critical end-uses such as autos and housing. Equally, major amounts of new capacity, planned during the Boom years, will start to come onstream in the Middle East and Asia.”
This led it to fear that “unemployment is set to become a key political issue in the West”. Unfortunately, this has also been proved correct. So have its concerns that the expected recovery in demand would put “great strains on cash-flow“, and that speculative bets on “oil prices linked to traders’ bets on the US$’s value will continue“.
However, although it identified this latter factor, it clearly underestimated its likely longevity, with oil so far averaging around $75/bbl versus its suggestion that “$50/bbl might be an average price“. The blog will keep this lesson in mind when posting its Outlook next weekend.
The blog’s aim is to ‘share ideas about the influences that may shape the chemical industry over the next 12 – 18 months’. It hopes that its 2010 Outlook again helped readers to better prepare for today’s more difficult economy.