Undoubtedly Global economy is at risk of a fresh contraction – Austerity VS Stimulus
The influential Paris-based think tank, Organization for Economic Cooperation and Development (OECD) expects a global economic slowdown in 2013. Organization requested, central banks of economic heavyweights (Euro zone, US, Japan, India and China) to provide further stimulus to their economies.
The world economy is expected to make a hesitant and uneven recovery over the next 2 years. warned that growing popular frustration with austerity and its consequences could also prove fatal.
- The world economy would grow by 2.9 percent this year and by 3.4 percent in 2013, down from an initial forecast of 3.4 percent and 4.7 percent
- The euro zone’s fiscal and banking crisis remains the greatest threat to the world economy and warned that the currency area might not survive in its current form.
- The GDP growth across the Organization for Economic Cooperation and Development (OECD) was expected to match 2012 growth of 1.4 percent in 2013, before gathering momentum to 2.3 percent for 2014.
- Economy of the 17 euro zone member states would contract by 0.4 percent in 2012 and by 0.1 percent in 2013.
- Indian economy is expected to be bigger than the United States over the “long term” while China would emerge as the world’s largest economy by 2016.
- China is expected to grow by 8.5 percent in 2013 and 8.9 percent in 2014.
- India is expected to grow by 5.9 percent in 2013 and 7.0 percent in 2014, it’s currency and current-account deficit look set to stabilize.
- United States is expected to grow by 2.0 percent in 2013 and 2.8 percent in 2014.
- Japan is expected to grow by 0.7 percent in 2013 and 0.8 percent in 2014.
- Euro zone is expected to grow by -0.1 percent in 2013 and 1.3 percent in 2014.
- India, faced by a widening economic slowdown, high inflation and a weak rupee, will rebound in the coming two years.
- Combined, the two Asian Powerhouse (China and India) will soon surpass the collective economy of the G8 nations. Chinese and Indian economy is set to accelerate briskly in the next 2 years.
- Within the Euro zone, the economies of Greece, Italy, Portugal, Slovenia and Spain to contract again next year.
You can find full report here. “The risk of a new major contraction cannot be ruled out. A recession is ongoing in the euro area,” said OECD Deputy Secretary-General and Chief Economist Pier Carlo Padoan.
The main reasons for a slow recovery include private sector leveraging, fiscal consolidation, euro area crisis as well as EMEs (emerging market economies) slowdown, he said.
“The US economy is growing but performance remains below what was expected earlier this year. A slowdown has surfaced in many emerging market economies, partly reflecting the impact of the recession in Europe,” Padoan said.