Global Economy in 2013: Shockwaves from 2012 will Shake the Foundations of Recovery in 2013
The global economy is facing another year of uncertainty and anxiety in 2013. Throughout 2012, hopes were rife that a recovery would begin and resolutions would be found for the myriad of challenges facing both developed and developing economies. Unfortunately, 2013 will see austerity in developed economies backfire while emerging markets will have to look to each other and to their domestic markets for growth. On the bright side, the global economy is forecast to grow by 3.5% in real terms in 2013, a slight improvement on the 2012 figure of 3.3% but still nowhere near the pre-crisis record of 5.4%, reached in 2007. As 2013 progresses, growth will pick up and as such, Euromonitor International is expecting a recovery, albeit uneven and unstable.
Real GDP Growth: 2007-2013
Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund (IMF), World Economic Outlook (WEO)
Note: Data for 2012/2013 are forecasts.
Our recently published Special Report: Global Economic Prospects for 2013 looks at the issues likely to impact negatively on global economic growth in 2013:
- Austerity policies in developed economies are set to continue into 2013, despite growing evidence that fiscal consolidation on the scale seen in 2012 is negatively impacting real GDP growth. Fiscal austerity programmes in the UK and, to a lesser extent, in the USA have backfired with the UK going into 2013 with the threat of a triple-dip recession looming;
- The impending fiscal cliff in the USA is threatening any hopes of recovery on that side of the Atlantic in 2013. The fiscal cliff is a set of proposed tax cuts and spending increases set to expire on December 31st 2012, unless the Obama administration and the Republican party who hold the majority in the House of Representatives, can come to an agreement which would see either or both of the measures extended into 2013;
- The eurozone crisis will rumble on into 2013, thanks to inadequate policy action in 2012 and reticence amongst decision makers in Brussels to take any definitive action, such as creating a fiscal union or driving structural reforms;
- Concerns over commodity security will persist in 2013. International trade flows are at risk from protectionism, as governments impose trade and capital restrictions to stop foreign money from flowing out of the economy and to keep cheap imports out, favouring more expensive, domestic goods and services;
- Unemployment will stay elevated across the developed world particularly across the eurozone, the rest of Western Europe and the USA, staying stubbornly high despite lower interest rates and rounds of quantitative easing designed to stimulate investment and job creation.
2013 will see most regions grow to some extent in real terms, despite the on-going fiscal crises in the USA and Western Europe, high unemployment and waning consumer confidence. The eurozone will be the only region to shrink in 2013, with -0.1% real GDP growth forecast. Our recent Special Report: Short-Term Forecast of Global Real GDP Growth looks at prospective growth rates for 2013 across the world:
- In regional terms, the Asia Pacific region is set to be the fastest growing region in 2013 with real growth of 5.9% forecast;
- Western Europe is expected to contract by 0.1% in 2012 before returning to growth of 0.5% in 2013;
- Developed countries are expected to grow by 1.4% in real terms in 2013 while the main engines of growth, the developing countries, are forecast to expand by 5.5%.
2013 will see policymakers across the world struggle with many of the same issues they were faced with in 2012. However, lessons have been learnt in 2012 and Euromonitor International is looking forward to the green shoots of recovery appearing in the second half of 2013.