The last day of 2009 is a good time to think about 2010. Below are my forecasts. They are grouped into four categories: global, Polish, outside-the-box and lighter forecasts. Comments are very welcome. I will discuss these forecasts on 31 December on radio TOK FM at 16:00. If you leave your comments before then we will discuss them during the show.

2010 global forecast

  • World GDP will grow at some 2 percent, with a dip in world activity in the second half of the year amid governments withdrawing fiscal stimuli, compared with 1 percent recession in 2009
  • Europe will struggle with high debt levels, Greek debt will be downgraded to one notch above junk, UK and France will lose triple-A ratings. Governments’ fiscal austerity  actions will come about the right time to restore confidence in the euro.
  • Chinese will keep renminbi undervalued, other Asian countries will follow. European fiscal woes will lead to moderate dollar appreciation in the early part of the year, followed by possibly sharp dollar fall in the second half of the year, which will begin the long dollar journey travelled by the British pound hundred years ago. Dollar drop will take place after Chinese SAFE announces it will stop buying US treasuries and will invest incremental reserves in Asia, Africa and resource rich emerging markets.
  • G20 will prove dysfunctional, will do a lot of talking and little action. Most important decisions will be taken during bilateral meetings. European Union will struggle to transform G2 into G3, and will eventually succeed. Belgian EU President, initially perceived as a weak fan of Japanese poetry will prove very effective and his star will shine stronger than that of the Gallic rooster on high heels.

You may shoot me with your words,
You may cut me with your eyes,
You may kill me with your hatefulness,
But still, like air, I’ll rise.

(Maya Angelou, Haiku poem quote)

  • Tax on bankers’ bonuses will be avoided by creating bank branches in tax heavens. It will also accelerate the unstoppable trend of moving the world financial centre to Asia.
  • Food prices will start to rise again.
  • Global income disparities will become larger than ever. New multibillion fortunes will be created in emerging markets, while at the same time the number of people living in extreme poverty will rise.
  • Bankers will have learnt nothing from the crisis. Zombie-bankers will continue the huge dollar carry trade (short dollar, long commodities and equities), it will work nicely in the first half of 2010, then will collapse with strengthening dollar.
  • Central banks will err on the dovish side, printing money and keeping interest rate at zero for longer than necessary. It will feel nice in 2010, but the price will be paid later in terms of high global inflation and volatile output. Alan Greenspan’s Age of Turbulence will be set in motion. In late 2010 Paul “The Hammer” Volker will refuse to shake hands with “Helicopter” Ben Bernanke during high level reception, media will notice.

2010 Polish forecast

  • In 2010 growth will accelerate to 2-3% from a notch above 1.5 in 2009. Poles will the most optimistic nation in Europe. At the end of 2010 Poland will embark on the Golden Polish Decade, best the years in the history of Poland.
  • Poland will continue to spend on infrastructure creating many jobs and removing number of transportation bottlenecks.
  • Ministry of economy will create a special taskforce to improve business regulatory environment, a number regulatory changes will be enacted and Poland will jump (in 2011) in the World Bank Doing Business. It will also improve chances of Civic Platform to win election in 2011 despite emerging new contenders.
  • Polish fiscal Policy will continue to remain a drag on Poland’s growth prospects. No major reforms will be undertaken until 2012. Finance ministry will continue its creative budgeting and will try to convince European Commission that Poland’s public debt should be counted without the costs of the pension reform. Commission will remain unconvinced.
  • Fiscal deficit will be smaller than planned but will exceed 6 percent of GDP for the second year in the row. Finance minister will call smaller than expected deficit a big success.
  • Donald Tusk will make ten more promises that will not be fulfilled.
  • Presidential elections will be very exciting, and will set the stage for transformation of the political scene in 2011. New Prime Minister will not be so new.
  • National Bank of Poland will start preparations for future foreign exchange market interventions, but no large interventions will take place until 2011, when strong pressure on zloty appreciation will emerge ahead of Poland’s planned ERM2 membership in 2012.
  • Future Polish global internet giant will be created by bright Polish students. In 2010 it will barely make ends, but in the coming years it will reach market cap north of 1 trillion renminbi. A number of Polish companies will plan global expansion, and they will achieve great success in the forthcoming years. Many companies will look far east instead of looking west.

Outside-the-box

  • Pre-Lehman shadow banking will shrink and will become tightly regulated (hedge funds, non-bank financial intermediaries, SPVs). However the new shadow banking will be born while regulators will continue to look in the yesteryear direction.  Banking (or more broadly financial) services will become a business process added to other retail sales or services processes. Retailers will form their own banks, will offer credit cards and other consumer finance products, will collect deposits and offer financial products which enhance their core product sales. It has already started in South America and in some big hypermarket chains.
  • Israel will bomb Iran nuclear sites, unknown unknowns will remain unknown. There will be more terrorist attacks attempts in the aftermath of the Israeli attack.
  • New climate summit will conclude with firm commitments to carbon dioxide emission reductions, rich countries will agree to provide more funding. Global carbon trading will emerge and will become a big market in the coming years.

Lighter forecasts

  • Number of searches in Google will top 100 billion per month, compared with 80 billion in late 2009. Pizza hut will remain the top search item among food and beverages. Among European politicians Sarkozy and Berlusconi will continue to fight for the most searched name on Google.
  • Number of Facebook members will top 500 million, as compared with 350 million in 2009. Average Facebook member will spend one hour per day on Facebook (as compared with 55 minutes in 2009), which will total 500 million Facebook man-hours per day, or more than billion working man-months for entire 2010. If each Facebook member worked instead of playing and his/her monthly wage was 1000 dollars, world GDP could have risen by  more than trillion billion dollars, which is more than the GDP of Korea or Australia (2008 data, nominal dollars)
  • China will continue to build its image as the world power. The quest for fastest (trains), tallest (building), largest (banks, corporations), best (schools, takeover deals) will continue. To cement its world second biggest economy status China may establish a “Tsai Lun Prize” for excellence in innovation, literature, culture, and sciences (on maybe more categories). The prize will be 10 million renminbi, i.e. some 20-30 percent higher than the Nobel prize. In the coming decade it will dwarf Nobel prize in terms of reputation. After all paper invention brought more good to humanity than dynamite invention.
  • The final of the world football championships in South Africa will be between African and South American teams.
  • I will publish my first fiction book in Polish, it will become a bestseller.

I wish all my blog readers a Happy and Prosperous Year. It will a better year than 2009.