Businesses and individuals are likely to be far more wary about taking on debt in the future. And that is likely to be a major factor in the global economic recovery, according to Societe Generale economic strategist Xavier Denis.

Denis, who is based in Paris, warned members of the Bahraini-French Business Club at their meeting at the Golden Tulip Hotel yesterday that while the global economic recovery is gathering pace it is likely to slow down in the second half of the year.

And the level of growth next year is also likely to be subdued, he said. "The great rebalancing is happening," he said.

"There is a speeding up of the shift between the West and emerging markets. The West has been hard hit by the economic crisis and recovery will be slow not just in 2010 but continuing for some years.

"But while there is not a de-coupling between Western economies and emerging markets there is a growing divide between them in terms of growth."

"China will continue to grow by eight per cent to 10pc annually. That is lower than in the past," he said.

"Globally economic growth will slow down because of de-leveraging of the private sector and by individuals," he added.

"De-leveraging in the financial sector in the US is already underway with the need to restore the banking sector's health.

"That means that while West concentrates on cutting its debt levels, emerging markets growth will be constrained by subdued demand from the US and Europe.

"Previous growth before the economic downturn was fuelled by excess credit and I doubt we will be going back to that situation," he said.

"Big emerging economies are better focused to grow relatively quickly but they will remain constrained by slow growth in the West.

"The US grew year-on-year by 5.7 per cent in fourth quarter but this was largely due to a fall in inventory run downs. This is a technical rebound and inventory rebuilding will be temporary and is probably not sustainable.

"The rebound remains based on fiscal stimulus and practically zero per cent interest rates and that also has to be temporary. We expect US growth of around 2.4pc this year. That is less than the consensus which is around 2.7pc," he said.

"I do not expect a strong rebound in 2011 and I expect continued high unemployment," he added.

Denis was in Bahrain visiting Societe Generale's wealth management operation in the kingdom based in the National Bank of Bahrain tower.

"Economic revival is there, but growth may weaken this year," he said. "Recovery is taking hold driven by temporary factors but headwinds continue to blow," he added. -TradeArabia News Service