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Manushi Jain, Euromonitor International’s Economist, discusses the world’s economy in 2011 and the global prospects in the upcoming year. The global economy is expected to slow in 2011, however financial conditions are improving faster than most analysts expected.

There are several key points hindering recovery, however. These include:

  • Uneven Global Recovery
  • Growing government debt levels

Asia will lead global recovery due to several factors, including:

  • Large capital inflows
  • China and India’s economies are expected to grow in 2011

China and India’s booming economies are not just boosting regional growth, but global growth as well. While their growth rates will not surpass 2010 rates, they will still be very large.

The countries that will struggle to grow in 2011 are those at risk of sovereign default including:

  • Greece
  • Portugal
  • Ireland
  • Italy
  • Spain

In 2011, Greece and Portugal will be the only countries in Europe not out of recession.

There are several key trends that will shape global recovery in 2011 including:

Fiscal Consolidation

Many countries that borrowed to launch stimulus programs now have large public debt levels. To counter their debt, they are launching fiscal consolidation programs in the form of government spending cuts. The immediate impact of such programs means stifling consumer spending in order to improve the economy in the medium to long term.

Protection measures by central banks

Central banks have been using their money to protect export competitiveness and stimulate their economies. However, these measures can hamper international trade.

Unemployment

Unemployment will still be a problem in many advanced economies in 2011. This is almost a direct result of the fiscal consolidation programs in these countries. Global employment levels are not expected to reach pre-recession levels until 2015. As a result of these levels, consumer spending will remain weak.

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