Nariman Behravesh's insights from the Davos World Economic Forum indicate that as jitters about a double dip are subsiding, anxieties about "grand experiments" and "end games" are on the rise.
The next few years will
bear witness to the results of some rather dramatic economic experiments.
Likewise, we are likely to develop a clearer sense of the sustainability of the
fiscal and monetary trajectories of many of the world’s most important economies.
Grand Experiments
Will the United Kingdom's Aggressive Programme of Fiscal Austerity
or the U.S. Push for Growth Be More Successful?: Although it will take a few
years to determine which approach will be more effective, the comparison is a
little unfair because the U.S. economy is much larger (with a higher growth
potential) and the U.S. dollar is still the “safe haven” currency. Any
significant action on the U.S. deficit problem seems unlikely before the 2012
presidential election.
Will the Chinese Renminbi Become a Major Reserve Currency Soon?:
China’s leadership seems keen on elevating the status of the renminbi. However,
these ambitions are at odds with the Chinese government’s desire to tightly
control the appreciation of the renminbi. In the end, although China’s currency
is becoming more internationalised, it will be many years before the renminbi
achieves the status of the dollar, euro, yen, sterling, or Swiss franc.
End Games
When Will the (Inevitable) Restructuring of Eurozone Sovereign
Debt Occur?: Renewed financial jitters vis-à-vis the Eurozone’s sovereign debt
problems have begun to focus minds on the next phase of crisis management. This
will very likely include a debt restructuring plan, with “haircuts” for
investors and further aid for the European banks holding much of this debt.
Financial markets may force such an outcome as early as this year. That said,
even a “fringe breakaway” scenario for the Eurozone is still quite unlikely.
Will China Be Able to Avoid a Hard Landing in the Next Few Years?:
The Chinese government’s response to the global financial crisis consisted
mostly of encouraging state-owned banks to make massive loans to local
governments. Unfortunately, a large share of these funds was used for real
estate investments. Quite alarming are statistics that show that the value of
housing relative to GDP in China is now at the levels reached in Japan in 1990,
before its bubble burst.
World Economic Outlook
The World Outlook—More Upbeat News, But Also More Volatility: The
more cheerful economic news during the past couple of months points to a
stronger global recovery this year. As a result, IHS Global Insight has revised
its world growth forecast for 2011 upwards from 3.4% to 3.7%. Meanwhile,
financial and commodity markets have been volatile. This volatility could
develop into major headwinds for the world economy.
United States—Things Are Definitely Looking Up: Since November,
most of the U.S. economic data have shown a marked improvement in growth
prospects—with the major exception of housing (which contributes only 6% to
GDP). The recent tax cut extension and stimulus package will, alone, add as
much as 0.6 percentage point to growth this year and reduce policy uncertainty.
Europe and Japan—On Track for Slower Growth: The recoveries in
both the Eurozone and the United Kingdom are likely to lose energy in the first
half of this year because of fiscal austerity programmes and higher interest
rates due to market fears about sovereign defaults/restructuring. Japan’s
growth is also set to slow with the end of consumer incentives, which boosted
growth in the middle of last year.
China—Minimal Slowing Because of Provincial Defiance: After
slowing briefly, most indicators of Chinese growth are showing renewed
strength. Some of the explanation for this has to do with the fact that
provincial governments are not on board with slower growth. More troubling are
accusations that local officials are foiling attempts to cool the property
markets. This means that even a soft landing is becoming less likely in 2011.
Other Emerging Markets—Still Rolling Along: Most of Asia remains
on a robust growth path. Indeed, India is on track to grow by at least 8% for
the next few years. The outlook for other Asian countries, including the
Philippines, Singapore, South Korea, Taiwan, and Thailand, has also improved.
In other emerging regions (especially Latin America, Africa, and Central Asia),
strong global demand and rising commodity prices are helping growth prospects,
but creating inflation headaches.
Commodity Prices Are on an Upward Path—the Only Debate Is about
the Slope: The recent commodity price increases have been broadly based,
affecting nearly every industrial sector except semiconductors. Although
specific factors (inventories, speculative demand, etc.) will determine the
extent of price rises for specific commodities, double-digit price increases
seem the most likely outcome for most raw materials.
Rising Food Prices Are Hurting the World's Poor: Food prices are
at or close to the record highs reached in 2008. This is hurting the world’s
poorer countries. In the United States and Europe, households spend roughly
10–12% of their budgets on food. In China and India about half goes to food. In
the poorest countries of the world, the percentage is closer to 75%. Also, part
of the recent inflation increases in emerging markets is due to food.
On the Horns of a Dilemma—Emerging Markets' Central Banks Are Trying
to Keep Both Currencies and Inflation from Rising: Strong economic growth and
rising commodity prices are pushing inflation and currencies up for many
emerging markets. This suggests that central banks in the emerging world should
be tightening monetary policy and raising interest rates. However, such a move
would attract even more “hot” capital inflows, further pushing up exchange
rates and hurting competitiveness.
Talk of Currency "Wars" Is Exaggerated: Recent
accusations about the United States and China manipulating their currencies are
(at least partially) off the mark. Even though China tightly controls the rate
at which the renminbi appreciates, escalating inflation means that China is
also losing competitiveness. Furthermore, notwithstanding the temptation to
label the Federal Reserve’s second quantitative easing (QE II) programme as
currency manipulation, the U.S. dollar has recently appreciated against some
key currencies.
Despite Increased Volatility in Financial and Commodity Markets,
Business Sentiment Is Improving: Almost all measures of business sentiment have
improved since the autumn. This can be seen in a majority of recent purchasing
managers’ indexes worldwide (even in the Eurozone), as fears of a double dip
have receded. The upbeat mood is spreading from large companies to smaller
ones.
Real
GDP Growth (% Changes)
2008 2009
2010 2011 2012
2013
United States 0.0
-2.6 2.9 3.2 2.9 3.1
Eurozone 0.4
-4.1 1.7
1.5 1.6
1.7
United Kingdom -0.1 -4.9
1.6 1.8
2.2 2.5
Japan
-1.2 -6.3
4.4 1.2 1.5
1.9
China 9.6 9.1 10.1 9.5 8.8 8.9
India 5.1 6.8 8.5 8.3 8.5 8.6
Brazil 5.2 -0.6 7.5 4.9 5.5 5.2
Russia 5.6 -7.9 4.0 4.3 3.7 3.6
World 1.8 -1.9 4.1 3.7 3.8 4.0
fecha |
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02/09/2006| |
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01/09/2006| |
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30/08/2006| |
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02/08/2006| |
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02/08/2006| |
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30/07/2006| |
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30/07/2006| |
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27/07/2006| |
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27/07/2006| |
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21/07/2006| |
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20/07/2006| |
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20/07/2006| |
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18/07/2006| |
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16/07/2006| |
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13/07/2006| |
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12/07/2006| |
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12/07/2006| |
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07/07/2006| |
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07/07/2006| |
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06/07/2006| |
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29/06/2006| |
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29/06/2006| |
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29/06/2006| |
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29/06/2006| |
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28/06/2006| |
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26/06/2006| |
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26/06/2006| |
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21/06/2006| |
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21/06/2006| |
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20/06/2006| |
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20/06/2006| |
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04/06/2006| |
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09/05/2006| |
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03/05/2006| |
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03/05/2006| |
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03/05/2006| |
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03/05/2006| |
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18/02/2006| |
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04/02/2006| |
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04/02/2006| |
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29/01/2006| |
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23/09/2005| |
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