What’s the Current State of the Global Economy?

global economy

photo by ThinkingEurope

2013 has, so far, seen a much-improved state in the Global Economy compared to the previous few years. 2011 was an exceptionally fraught year for the US, with a close-shave to a default which would have had huge knock-on effects across the globe. Then it was Europe’s turn in 2012 to become extremely stagnant with some downgrades in credit ratings among the big powers as well as bailouts. The good news now is that the Eurozone is showing market growth in GDP, with the housing market specifically in the UK showing an upturn on average. The US also seems to be following the trend with a minimum GDP increase of 1.7% likely to occur and the markets have reacted well to China seemingly resisting their threat of a slump earlier in the year, which if occurred would have had a severe knock-on in the world markets.

It’s difficult to confirm whether this small hint of a recovery is going to be sustainable or not. Growth factors are important and all signs point to a positive outcome, however some economists are leaning on the side of caution, suggesting that all major economies need to show signs of recovery together if there is going to be a global recovery. Multiple budget cuts have reduced the suppression on market growth however there needs to be more encouragement on consumers to spend more and for companies to invest their profits – the US is a great example of how this impacts the economy: the housing market recovery seems sustainable, banks are lending and consumer debt is falling. The Eurozone recovery has struggled with having to complete bailouts for some of its members as well as the banks not lending at a rate that would boost the economy, remaining cautious of the consumers’ ability to repay debt and companies to invest wisely.

Most economists are looking to the US to create the catalyst for a full recovery in the global economy with the Eurozone remaining the weakest of the main three, Asia is showing signs of recovery and growth which is being halted by political policies. China’s results for July indicates that there are no signs of a slump from occurring, however due to their economy transitioning from investment to consumption, this has halted any growth. Of course, all three economies recovering would be the ideal, however historic trends have shown that a boost in the US economy has led to a knock-on effect in the other two economies and therefore an overall global economic boost.

Recent events in Syria haven’t helped the Eurozone recovery, especially with uncertainty over the UK’s involvement. Involvement in military action would have to have resulted in a slow-down in budgetary cuts, especially since the UK military is withdrawing from Afghanistan within a year or so. This reduction in spend could have been offset by an increased spend occurring in Syria, however with the confirmation today being published that the UK are currently not providing military aid to Syria confirms that certainty should remain in the UK economy.

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One Response

  1. Tony H Leather

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