The global economy still hasn’t stepped back on track after the financial crisis that erupted in 2008. In 2012, the global growth descends to almost 3%. This fact suggest that since the crisis unfolded, a half percentage point has been cut off from the long-term tendency. The sluggish trend is expected to continue. The developed world’s economies are still recovering from 2008-2009 crisis.
In addition, emerging markets did not pick up the slack in 2012 unlike in 2010 and 201. Most probably, they won’t do it in 2013 as well. Uncertainties across a number of regions are very much likely to continue. Events such as continuous financial issues in the Euro Zone, post-election fiscal cliff question in the US and Chinese leadership transition will very much likely continue to cause global impact over the sluggish trade and unmoved foreign direct investment.
A recent outlook, released by the Conference Board, predicts 1.3 percent growth in 2013, compared to 1.2 percent in 2012 along the mature economies. The small numbers are due to the Euro Zone complications. The Euro zone is expected to meet a very slow growth of 0.2 percent after the -0.6 percent shrink in 2012. The growth in the US is expected to descend from 2.1 percent in 2012 to 1.8 percent in 2013.
In short-term, the forecast predicts that the US and other mature economies will go toward closing large output gaps. This process can be explained through the difference between current output and the level of output an economy can produce without inflation. This is in respect of the size of its labor force and the potential to invest and create technological progress. Weak demand driven by the 2008-2009 crisis formed the current output gap. This development should allow the annual US growth during 2013-2018 to surge around 2.3% before edging down to 2.0% in 2019-2025. Respectively in the same two periods, Japan is expected to grow at 1.1 % and 0.9 %.
A harder slowdown is expected for smaller economies over 2013, and even beyond. The outlook expects that growth in mature and emerging economies is going to fall from 5.5% in 2012 to 4.7% in 2013. Chinese growth falls from 7.8 to 6.9% and in India from 5.5 to 4.7 %. For 2019-2025 period, emerging and developing countries are expected to grow by 3%.
Structural transformations in the emerging economies is very much likely to drive the global slowdown in the long-term projection to 2025. Countries like China, India and Brazil will balance their economic growth model with intensive investments. The structural economic speed limitation is likely to drop. This will drive a descent of the global growth in contrast of the recovery we expect in mature economies after 2013.
