World economy: what’s to be expected?

Today,s World Economy,One big gamble.
Image by Wim Hazenhoek. via Flickr

The world’s largest economy, the US, is still spluttering along, the eurozone is trying to avert a sovereign debt crisis and Japan has lapsed back into recession after a devastating natural disaster.

The slowdown in some key developed markets and the tightening of monetary policy in emerging markets has impacted negatively on global trade and industrial production volumes. In a recent study, PwC expects this is evidence of a temporary blip and not a permanent dip – volumes will recover, but with an ever increasing focus on emerging markets as customers and not just producers.

Tensions over currencies have been off the front pages in the first half of 2011, but there is potential for another flare up in the near term, as the underlying causes of the contention have yet to be resolved.

The extent of the economic damage caused by the Japanese earthquake took some time to become apparent. The scale of the disruption caused to the supply chains of manufacturing firms was larger than expected (particularly in the automotive sector), which plunged the economy back into recession in the first quarter of 2011.

The US economy has also experienced a slowdown in recent months, with the economy expanding well below trend in Q1 2011, and there has been soft data emerging from the US labour and housing markets and the manufacturing sector since the start of the year.

The main body of the reconstruction phase of the response to the recent Japanese earthquake will help boost world GDP growth to 3.6% in 2012. The general upswing in growth in 2012 is expected to be driven by improved growth performance in some of the G7 economies such as Japan, US, UK, and the Central and Eastern European countries like Russia and Poland. These countries are expected to be boosted by increased global trade, recovering consumer spending and lower levels of uncertainty surrounding global economic prospects.

You can see the full Global Economy Brief report here.

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5 thoughts on “World economy: what’s to be expected?”

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