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
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