What’s in store for the global economy?
As the year turns, words of leading US economist could suggest yet more bleak times ahead: “Thank goodness emerging markets can carry the global economy.”
As the year turns, what’s in store for the global economy?
Europe’s on the threshold of recession.
Its decade-old single currency seems to be on the brink of collapse.
The US is struggling with a jobless recovery as the presidential election year begins.
Meanwhile, emerging economies like China, its Asian neighbours and most of Latin America – especially Brazil, which is now the sixth biggest economy in the world, leaving previous incumbent Britain in its rear-view mirror – are booming.
To find out more I turned to the Peterson Institute for International Economics on “Think Tank” row in Washington, DC.
It’s the only major think-tank in the US devoted to international economics and its leading thinker, Dr C Fred Bergsten, has been running the institute since it was created in 1981.
He says that in 2012, high income and relatively rich nations used to driving the global economy – but whose growth rates are essentially stagnant, like the US, Western Europe and Japan – will rely more heavily on emerging economies in Asia and Latin America to carry the global economic outlook. (See Brazil reference above)
They’ve shown they can grow with momentum on their own. They’ve got lots of policy space to expand their economies if they need that. They’re increasing trade and investment among each other and that’s a fundamental shift in the structure of the global economy.”
Europe, he says, will narrowly avoid a real recession and may end up stronger than before – but it’ll be close, especially if it doesn’t get to grips with its financial crises more quickly.
The 10-year-old Euro – the single currency for more than three hundred million people – will survive because the Europeans can’t afford to let it fail.
“I think the Germans will pay whatever’s necessary and I think their domestic politics support that … I think the European Central Bank will lend whatever is necessary. I also suspect they will bring in the International Monetary Fund to supplant and supplement their resources.”
Dr Bergsten says whoever wins the 2012 US presidential election could face significant economic challenges in the years ahead, especially if Europe starts to sort out its economic issues and US politicians continue to trade blame over the country’s debt and deficit problems.
It looks like we will continue to enjoy that respite from market pressure at least through the course of next year and that simply means we will delay more, we will hesitate to take serious action and at some point – no one can know when – at some point it will catch up with us.”
It’s a grim message for whoever find themselves propelled towards the Oval office late in 2012. Things may be about to get even worse with yet more serious ramifications for the people of this country and the world.