Europe continues to weaken world economy
Ottawa – With much of the 'eurozone' still mired in recession, the global economy will expand at a tepid pace of 2.5% this year, according to The Conference Board of Canada's World Outlook - Summer 2013. This situation will begin to...
Ottawa – With much of the ‘eurozone’ still mired in recession, the global economy will expand at a tepid pace of 2.5% this year, according to The Conference Board of Canada’s World Outlook – Summer 2013. This situation will begin to change as the US economy picks up steam toward the end of this year, and growth in the world economy is expected to increase to 3.2% in 2014.
“Now that the US economy is heading in the right direction, Europe remains the main stumbling block to higher growth in the world economy,” said Kip Beckman, principal economist. “The latter region continues to be plagued by record high unemployment rates, a fragile banking sector, and high levels of government debt. “
Highlights of the Outlook report
– The world economy will expand by 2.5% this year and 3.2% in 2014.
– The eurozone’s unemployment rate is over 12% and the rate for young people in Greece and Spain is 50%.
– China’s economy will slow from an annual average of close to 10% in recent years to slightly less than 8% in 2013 and 2014.
Another credit crisis possible
Many banks in Europe remain undercapitalized and highly leveraged, and some have been operating with huge losses. Another credit crisis in the eurozone cannot be ruled out if the EU fails to address this issue. In addition, continued labour market rigidity and a high degree of regulation will limit growth prospects in Europe. Real GDP in the eurozone is expected to drop by 0.5% in 2013, and a gain of only 1.1% is forecast for 2014.
Growth in the Asia-Pacific region has been restrained by the developments in Europe and the sluggish US economy in the first half of this year. However, fiscal and monetary policies implemented by many governments in the region have helped blunt the weak state of the global economy.
The Asia-Pacific region will continue to lead the global economy with real GDP growth of 4.7% this year and close to five% in 2014. China’s economic growth will slow to 7.9% this year and next, down from an annual average of almost 10% from 2009 to 2011. South Korea and Taiwan are benefiting from the shift in technology consumption from personal computers to smartphones and tablets. Both countries are expected to expand in the 3 to 4% range over the near term.