Is global economic recovery losing steam?

Author Topic: Is global economic recovery losing steam?  (Read 388 times)

Offline fatema nusrat chowdhury

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Is global economic recovery losing steam?
« on: February 25, 2015, 03:38:45 PM »
The elites of the financial world gathered in Washington last week

for the annual meetings of International Monetary Fund (IMF) and World Bank, They heard some sobering news from the hosts about prospects of the world economy in the short- to medium-term. Indeed, it has become a pattern: the widely watched IMF's World Economic Outlook starts with an optimistic projection at the beginning of the year, following up with downgrades to global growth, every quarter thereafter. Whereas in April 2074, IMF appeared bullish and expected the global economic recovery to be sustained, albeit with some downside risks, the final quarterly update of October 2014 has put a damper on those predictions.

Christine Lagarde, IMF's erudite boss, has even coined a new expression to describe the state of the global economy and its outlook, "the new mediocre". That sounds like a definite downgrade from the predictions of leading thinkers on the global economy who were describing the current state of affairs as "the new normal", i.e. a state of play when the world economy, and, particularly, the advanced economies, are expected to grow at sub-optimal rates while emerging market economies would drive global growth higher.

Going by their perceptions, the global economy could only sustain the momentum of recovery on the back of Asian and emerging market economies which showed greater dynamism and future potential than, for instance, economies of Europe. Perhaps there is some dent in that outlook as revealed by the latest quarterly update of World Economic Outlook (WEO).

GLOBAL ECONOMIC AND GEOPOLITICAL UNCERTAINTIES: The state of geopolitics and the economic recovery are interlinked. In 2Ot4, geopolitics has taken a turn for the worse. Rising tensions between Russia and the West have the potential of upsetting the cart of European recovery,

In the Middle East, the Arab Spring has morphed into a continuum of discordant forces rising in several countries, among which of course are Syria, Iraq, Libya, and Yemen, The Ghaza episode showed that the Palestinian problem remains a powder keg ready to erupt and derail the inconclusive peace process.

Brazil's presidential election this month will determine whether the country makes progress toward a new, more sustainable growth model or becomes more deeply mired in a largely exhausted economic strategy that is heading nowhere.

Thus, in a recent round up of the global economy, Mohamed El-Erian of New York University sees global markets encumbered by uncertainty in several areas, not just geopolitical tensions.

China's appetite for investment in properties and infrastructure appears to be cooling leading some analysts to predict that the economy's honeymoon with 7.0-8.0 per cent growth was probably coming to an end.

Abenomics in Japan is showing results, but the Japanese economy has been too long and too deep in the zero growth environment to become a significant player anytime soon. With monetary easing and fiscal expansion in place, much depends on Prime Minister Abe's ability to get structural reforms - the "third arrow" -- moving in Japan to spur growth.

India is yet to come out of its quagmire of growth slowdown. Investors, domestic and foreign, are counting on Premier Modi to deliver on his election promise of economic resurgence in order to regain the lost growth momentum.

With the exception of Germany, European economies are still reeling under the burden of debt, high unemployment, and slow growth, to have any meaningful impact on global economic recovery.

Whatever little movement that is expected in the world economy is likely to come from the US economy which has shown modest dynamism in the past year, creating jobs at a steady pace and bringing unemployment down. According to leading macroeconomist, Martin Feldstein, the US economy is expected to register its best growth rate since the crisis of 2008. So the US economy remains the only hope for a global recovery to keep up a positive momentum.

WHAT KIND OF RECOVERY IS THIS? Recent events have shown that recessions cause pain and misery even in the richest of economies. The Great Recession of 2008-09 saw US unemployment inching close to 10% in 2009 before starting to taper off. UK, Germany, and France also experienced protracted unemployment rates of 8.0-10%. Spain, Portugal, and Italy saw youth unemployment shoot up to 25-50%, in some areas. Greece was and still is a battered economy on many fronts. No wonder, the focus of the recovery in all these countries was on job creation.

Touted as the worst economic crisis since the Great Depression, analysts were quick to point out that the damage inflicted on economies was deep-rooted and the recovery would be hard and slow. The good news was that the “green shoots" of recovery started appearing by the close of 2009, from the shores of China-Japan, to Wall Street and beyond. The widely watched IMF's WEO, in its October 2009 issue, concluded that the global recession was ending.

Unique as the crisis was, it was highly likely that the recovery would have unique features as well. Because of policy uncertainties, concerns were raised by leading macroeconomists about the nature of the recovery.

First, it was unlikely to be a robust V-shaped recovery which happens when counter-cyclical policies – tax incentives and public spending expansion - are most effective; recessions in normal business cycles end this way.

Second, the prospect of a gradual U-shaped recovery was suggested by analysts who felt that circumstances were not conducive for counter-cyclical policies to be effective (e.g. when jobless rates are stubborn).

JEWEL KUMAR ROY

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Re: Is global economic recovery losing steam?
« Reply #1 on: April 05, 2015, 03:37:17 PM »
Informative  :)

Offline Nurul Mohammad Zayed

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Re: Is global economic recovery losing steam?
« Reply #2 on: April 19, 2015, 04:17:34 PM »
Well Written ...........
Nurul Mohammad Zayed
Assistant Professor & Head
Department of Real Estate
Faculty of Business & Economics
Daffodil International University

Offline ummekulsum

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Re: Is global economic recovery losing steam?
« Reply #3 on: May 04, 2015, 02:37:47 PM »
thanks for sharing...

Offline munna99185

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Re: Is global economic recovery losing steam?
« Reply #4 on: May 21, 2015, 02:08:08 PM »
I have known lots.

Sayed Farrukh Ahmed
Assistant Professor
Faculty of Business & Economics
Daffodil International University