Mr. Sagar is telling on World Wide economy crises

Global economic growth projected at 2.3% in 2013: United Nations

According to an UN report, in 2012, India ’s growth slowed to 5.1% owing to ongoing weakness in investment, a significant deceleration in household consumption and sluggish exports. While India ’s growth is likely to have bottomed out, the recovery will be slower than previously expected, with economic activity forecast to expand by 5.5% in 2013 and 6.1% in 2014.

Snapshot of the report titled “World Economic Situation and Prospects 2013” by United Nations

World Economic Situation and Prospects (WESP) 2013, released by the United Nations, reports that the global economic activity is projected to slowly gain momentum, but growth will continue to be below potential and employment gains will remain weak. Growth of world gross product (WGP) is now projected at 2.3% in 2013, the same pace as in 2012, before gradually strengthening to 3.1% in 2014, supported by an expected pickup in activity in the United States .

The report notes that since late 2012, new policy initiatives in major developed economies have reduced systemic risks and helped stabilize consumer, business and investor confidence, but with very limited improvement on economic growth. The risks are still tilted to the downside and have the potential to derail, once again, the still feeble recovery of the world economy. Short-term risks associated with the situation in the euro area, fiscal adjustments in the US and the sharp slowdown in large developing countries have diminished, but not disappeared. In addition, some new medium-term new risks have emerged, including potentially adverse effects of the unconventional monetary measures in developed economies, such as Japan and the United States , on global financial stability.

The report shows ongoing weaknesses in developed economies, which continue to face major risks and uncertainties. In the euro area, the risk of a near-term break-up has declined considerably, but the economic situation remains dire. The real economy is held back by austerity programmes, weak bank lending and continued uncertainty, with activity projected to contract by 0.4% in 2013. According to the report, only a small expansion of 1.1% is forecast for 2014, and this weak recovery remains uncertain given persistent banking and fiscal risks.

In the US , the avoidance of the fiscal cliff and expansion of monetary easing, along with gradual recovery in the housing sector, have somewhat improved growth prospects. Automatic government spending cuts and uncertainties associated with budget issues will weigh on aggregate demand. Economic growth is forecast to slow to 1.9% in 2013, before picking up to 2.6% in 2014. Political gridlock and additional fiscal tightening could result in much lower than projected growth.

In Japan , policymakers have taken bold expansionary measures in an attempt to resuscitate the economy from the grip of deflation, but the results of these policies remain uncertain. GDP growth is projected at 1.3% in 2013 and 1.6% in 2014.

Many large developing countries including Brazil , China , India and the Russian Federation , saw a significant deceleration in GDP growth in the past two years. This deceleration is attributed to a combination of weak external conditions and domestic impediments.

Warm regards,

Dr. S P Sharma

Chief Economist