The global economic recovery is now a fact, say economists with Desjardins Group in their forecast for 2010.

“After undergoing periods of extreme turbulence, financial markets will regain stability and will increasingly be able to base their fluctuations on fundamentals, without being constantly upset by unusual events,” stated François Dupuis, Desjardins Group vice president and chief economist.

After sliding 1.2% in 2009, the global real GDP will expand by 3.4% in 2010, maintaining a similar pace — 3.8% — in 2011. Dominated by China and India, developing nations will continue to act as drivers, with growth rates greater than 5% over the next two years.

Compared to that, the performances of the industrialized countries, which will record real GDP increases of 1.8% in 2010 and 2.0% in 2011, seem tepid.

“The United States and Canada will lead the way, posting growth of more than 2% for the next two years; the euro zone, Japan and United Kingdom will not manage to match this pace,” emphasizes Yves St-Maurice, director and deputy chief economist at Desjardins Group.

Desjardins cautions that the private sector, weakened by these last few years of economic crisis, remains shaky. This will impel governments to spend lots more money in 2010 to put it back on course. “The year 2011 will then see the start of another expansion phase, tempered by governments’ slow withdrawal from the economy,” adds St-Maurice.

The impact of the gradual comeback by oil prices in tandem with the world economy’s recovery will push the loonie up to parity with the greenback in the summer of 2010, predict Desjardins economists, who add that Canada’s manufacturers will be hurt by the Canadian dollar’s appreciation.

The soft global economy and commodity prices translated into a widespread drop by inflation in 2009. Desjardins forecasts inflation to remain low in 2010. As a result, “the first interest rate increase is not expected before fall 2010 in Canada and, in the United States, it might not happen until the beginning of 2011,” says Dupuis.

“As for the stock markets, they will maintain their momentum for the next two years,” says Dupuis. Economic growth will improve the profit outlook and investors will want to take more risks in one portion of their portfolio. Weaker than in 2009, stock market growth will still not be negligible for the next two years.

Desjardin forecasts the S&P 500 to post increases of 13.6% in 2010 and 8.0% in 2011. For the S&P/TSX, its respective increases will be 11.3% and 9.4%.

Desjardins Group is the largest cooperative financial group in Canada with overall assets of $163 billion.

IE