Global recovery in danger of stalling - Financial Times tracking index
12.04.2016,
12:29
The world economy is beset by feeble growth and a recovery that is “weak, uneven and in danger of stalling yet again,” CNBC reports citing the latest Brookings Institution-Financial Times tracking index.
YEREVAN, April 12. /ARKA/. The world economy is beset by feeble growth and a recovery that is “weak, uneven and in danger of stalling yet again,” CNBC reports citing the latest Brookings Institution-Financial Times tracking index.
In a publication ahead of the spring meetings of the International Monetary Fund and World Bank this week, the index provides sober reading, highlighting sluggish capital investment, falling industrial production and declining business confidence.
The results of the index are likely to be reflected in IMF forecasts for the global economy on Tuesday, prompting Christine Lagarde, fund managing director, to warn of the need to be “alert” to global risks with growth “too low for too long”. The IMF is widely expected to revise its 3.4 per cent forecast for growth in 2016 down again.
According to Professor Eswar Parasad, an economist at Brookings, the worst fears of a financial and economic crisis in January and February “might be over but after yet another year of tepid growth in 2015, the world economy in 2016 faces the unsettling prospect of more of the same”.
While the IMF has become more pessimistic about the outlook in recent weeks, the Brookings-FT Tiger index — Tracking Indices for the Global Economic Recovery — suggests there has been some stabilization of current conditions after a big decline in growth rates in the second half of last year.
The index shows how measures of real activity, financial markets and investor confidence compare with their historical averages in the global economy and within each country. There is evidence of extreme weakness in emerging markets, with recent data from many economies faring much worse than their historic averages, although there has not been a further decline in 2016.
In advanced economies the data are generally better, but the growth index is no higher than its long-term average as confidence has stumbled amid weaker financial markets and fears of shocks such as Britain's potential departure from the EU.
"Unless governments demonstrate the ability and willingness to undertake reforms and use policy measures to aggressively support growth, even the anticipated weak growth could be knocked off track," Prasad is quoted by CNBC as saying.
Most positive economic news is currently coming from the U.S., where employment, retail sales and credit growth remains strong despite faltering business confidence. Eurozone indicators are generally a little stronger in 2016 than last year, although investment, retail sales, and consumer confidence remain weak across the bloc, raising concerns about the sustainability of the recovery.
The UK has also held up, although investment, business confidence and industrial production appear to be suffering from uncertainties caused by the June referendum on EU membership.
In emerging economies, China appears to have withstood the fears of capital flight and currency devaluation that were rampant at the beginning of the year.
“Nevertheless, while Beijing is keen to stimulate growth, it is not showing much appetite for substantive market-oriented reforms — especially reform of the state enterprise sector — at a time of weak growth," Prof Prasad said.
India, now the world's fastest growing large economy, has used low oil prices to mask deeper structural weaknesses and falling industrial production, "raising questions about the durability of India's rapid growth."
The good news in the global economy, Prof Prasad said, is that emerging economies have survived the Federal Reserve's initial rise in interest rates without a major crisis. But with these economies still "vulnerable to shifts in external circumstances….even the weak recovery could prove all too fragile and fleeting." ---0---
In a publication ahead of the spring meetings of the International Monetary Fund and World Bank this week, the index provides sober reading, highlighting sluggish capital investment, falling industrial production and declining business confidence.
The results of the index are likely to be reflected in IMF forecasts for the global economy on Tuesday, prompting Christine Lagarde, fund managing director, to warn of the need to be “alert” to global risks with growth “too low for too long”. The IMF is widely expected to revise its 3.4 per cent forecast for growth in 2016 down again.
According to Professor Eswar Parasad, an economist at Brookings, the worst fears of a financial and economic crisis in January and February “might be over but after yet another year of tepid growth in 2015, the world economy in 2016 faces the unsettling prospect of more of the same”.
While the IMF has become more pessimistic about the outlook in recent weeks, the Brookings-FT Tiger index — Tracking Indices for the Global Economic Recovery — suggests there has been some stabilization of current conditions after a big decline in growth rates in the second half of last year.
The index shows how measures of real activity, financial markets and investor confidence compare with their historical averages in the global economy and within each country. There is evidence of extreme weakness in emerging markets, with recent data from many economies faring much worse than their historic averages, although there has not been a further decline in 2016.
In advanced economies the data are generally better, but the growth index is no higher than its long-term average as confidence has stumbled amid weaker financial markets and fears of shocks such as Britain's potential departure from the EU.
"Unless governments demonstrate the ability and willingness to undertake reforms and use policy measures to aggressively support growth, even the anticipated weak growth could be knocked off track," Prasad is quoted by CNBC as saying.
Most positive economic news is currently coming from the U.S., where employment, retail sales and credit growth remains strong despite faltering business confidence. Eurozone indicators are generally a little stronger in 2016 than last year, although investment, retail sales, and consumer confidence remain weak across the bloc, raising concerns about the sustainability of the recovery.
The UK has also held up, although investment, business confidence and industrial production appear to be suffering from uncertainties caused by the June referendum on EU membership.
In emerging economies, China appears to have withstood the fears of capital flight and currency devaluation that were rampant at the beginning of the year.
“Nevertheless, while Beijing is keen to stimulate growth, it is not showing much appetite for substantive market-oriented reforms — especially reform of the state enterprise sector — at a time of weak growth," Prof Prasad said.
India, now the world's fastest growing large economy, has used low oil prices to mask deeper structural weaknesses and falling industrial production, "raising questions about the durability of India's rapid growth."
The good news in the global economy, Prof Prasad said, is that emerging economies have survived the Federal Reserve's initial rise in interest rates without a major crisis. But with these economies still "vulnerable to shifts in external circumstances….even the weak recovery could prove all too fragile and fleeting." ---0---
