Home / Sezioni / capitali / The Global Economy in 2014 – Slow growth and short tails

facebook-link twitter-link


Registrati alla newsletter di sbilanciamoci.info


Ultimi link in questa sezione

Why we must end upward pre-distribution to the rich
How Goldman Sachs Profited From the Greek Debt Crisis
Solo lo spirito del Dopoguerra potrà salvarci dalla crisi eterna
The Conundrum of Corporation and Nation
La Grecia, le riforme e il giallo della tabella
Basic Income Pilots: A Better Option Than QE
Le coup de force inadmissible et irresponsable de la BCE contre la Grèce

The Global Economy in 2014 – Slow growth and short tails


The global economy had another difficult year in 2013. The advanced economies’ below-trend growth continued, with output rising at an average annual rate of about 1%, while many emerging markets experienced a slowdown to below-trend 4.8% growth. After a year of subpar 2.9% global growth, what does 2014 hold in store for the world economy?

The good news is that economic performance will pick up modestly in both advanced economies and emerging markets. The advanced economies, benefiting from a half-decade of painful private-sector deleveraging (households, banks, and non-financial firms), a smaller fiscal drag (with the exception of Japan), and maintenance of accommodative monetary policies, will grow at an annual pace closer to 1.9%.

Moreover, so-called tail risks (low-probability, high-impact shocks) will be less salient in 2014. The threat, for example, of a eurozone implosion, another government shutdown or debt-ceiling fight in the United States, a hard landing in China, or a war between Israel and Iran over nuclear proliferation, will be far more subdued.

Still, most advanced economies (the US, the eurozone, Japan, the United Kingdom, Australia, and Canada) will barely reach potential growth, or will remain below it. Households, banks, and some non-financial firms in most advanced economies remain saddled with high debt ratios, implying continued deleveraging. High budget deficits and public-debt burdens will force governments to continue painful fiscal adjustment. And an abundance of policy and regulatory uncertainties will keep private investment spending in check.

The Global Economy In 2014

The outlook for 2014 is dampened by longer-term constraints as well. Indeed, there is a looming risk of secular stagnation in many advanced economies, owing to the adverse effect on productivity growth of years of underinvestment in human and physical capital. And the structural reforms that these economies need to boost their potential growth will be implemented too slowly.

While the eurozone’s tail risks are lower, its fundamental problems remain unresolved: low potential growth; high unemployment; still-high and rising levels of public debt; loss of competitiveness and slow reduction of unit labor costs (which a strong euro does not help); and extremely tight credit rationing, owing to banks’ ongoing deleveraging. Meanwhile, progress toward a banking union will be slow, while no steps will be taken toward establishing a fiscal union, even as austerity fatigue and political risks in the eurozone’s periphery grow.

Read more