By Nick Mann | 2 May 2013
The global recovery is ‘hesitant, below par and uneven’ with economic growth expected to remain below trend this year and next, a UK economics think-tank said today
According to the National Institute of Economic and Social Research’s latest forecasts, the world economy will grow by 3.3% this year and 3.7% in 2014, well down on the 4.4% average recorded between 2003 and 2008, but slightly up from the 3.1% posted in 2012.
This reflects weak demand resulting from several factors, including continuing fiscal consolidation and debt reduction by private sectors, as well as poor credit availability and ‘significant’ policy uncertainties.
The NIESR said it had particular concerns over the eurozone, which is expected to remain in recession this year and, on current policies, to post 0.9% growth in 2014.
In the US, last year’s 2.2% gross domestic product growth is expected to be repeated this year, before a slight acceleration to 2.3% in 2014. Demand from the private sector had been strengthened by the continued improvement in banks’ and households’ finances, but this had been partly offset by sequestration.
The main drivers of economic growth continued to be the developing and emerging markets, the economists said. Output in these countries is expected to accelerate this year and next after last year’s moderate slowdown.
The OECED stressed, however, that the global economy’s medium-term prospects were ‘unusually uncertain’. Fiscal consolidation and banking sector reform could continue to weigh down on growth for several more years, with ‘major uncertainties’ over the feasibility of full economic and monetary union in the eurozone.
There were also uncertainties around the inevitable slowing of growth in countries that had been the most dynamic in recent years, such as China. Between 2003 and 2008 its growth averaged 11% but last year it posted 7.5%. It is now expected to average 7% a year.
Between 2015 and 2019, the NIESR expects the world economy to grow by 4.2% a year on average, with eurozone growth averaging 1.9% and the US economy expanding by 2.9% a year.
This slowdown from the 4.4% average worldwide growth recorded in the five years before the crisis was ‘more than accounted for’ by a projected slowdown in developing economies, where productivity was expected to move closer towards that of more advanced economies.
