by Eswar Prasad and Karim Foda
In the lead-up to the G20 summit in Los Cabos, the Brookings-FT Tiger index shows that this stop-and-go global recovery has stalled once again.
The engines of world growth are running out of steam while the trailing wagons are going off the rails. Emerging market economies are facing sharp slowdowns in growth while many advanced economies slip into recession.
Political fragmentation and gridlock have hurt confidence and stunted the effectiveness of macroeconomic policies. Financial markets have shed their optimism and investors are clamoring to retreat to safe havens as confidence has tumbled.
The US economy had been a relatively bright spot, although a fragile one, but growth is showing signs of slowing and employment growth has weakened even as the economy gets closer to an impending fiscal crunch. The UK and many of the eurozone economies are in or at the edge of recession. Even the once-mighty German economy seems to have lost its footing while Japan’s economy is stirring but remains mired in weak growth. Read more
By Eswar Prasad and Karim Foda
The world economy has hit a rough patch on the road to recovery and is in danger of skidding off course.
The latest update of the Brookings Institution-FT Tracking Indices for the Global Economic Recovery (TIGER) reveals abundant cause for gloom. The general picture among G20 economies is one of slowing growth, swooning financial markets, and declining consumer and business confidence.
A series of adverse shocks, coupled with political wrangling that has stymied effective policymaking and added to uncertainty, has crippled growth in advanced economies. Emerging markets have maintained strong growth so far, but the battle against domestic inflation and weaknesses in major export markets are beginning to affect their growth as well.
Debt crises, weak employment growth and policy dithering in the major advanced economies have exacerbated global economic uncertainty. The perception of rising risk and inadequate policy responses has shaken financial markets and dented confidence around the world. Reflecting widespread anxiety and fear about global economic prospects and the lack of obvious policy solutions, stock markets around the world have taken a beating over the past summer. Read more
By Shankar Acharya
What might 2011 hold for us? Given the intrinsic uncertainty about the future, the really honest answer would be: I don’t know. But that would be far too boring a response and, perhaps more to the point, would not fill a column. So, at the risk of looking foolish in a year’s time, here are some predictions for 2011. Read more
By Eswar Prasad and Mengjie Ding
The global financial crisis triggered a sharp increase in public debt levels, both in absolute terms and relative to GDP. The level of aggregate net government debt in the world rose from $23,000bn in 2007 to an expected $34,000bn in 2010. IMF forecasts indicate the level will reach $48,000bn in 2015. The ratio of world debt to world GDP rose from 44 per cent in 2007 to 59 per cent in 2010, and is expected to climb to 65 per cent in 2015.
Rising debt levels pose risks to fiscal and macroeconomic stability and also imply transfers of wealth across generations. Our analysis shows that advanced economies (AEs) account for much of the increase in world public debt, putting their own as well as global financial stability in jeopardy.
View the FT’s interactive graphic
By Eswar Prasad and Karim Foda
Despite all the portents of doom the world economy has been quietly mending itself.
This is not to say that the recovery is firmly entrenched or that few risks remain, but despite the rough patches in 2010, it is important to keep in mind that the economic picture looks far better now than it did a year ago. Read more