World Economic outlook - 2013 world economic growth forecast United Nations : The United Nations (UN) has cut its global economic growth forecasts for this year to 2.6% from the June 2011 forecast of 3.6%. The multilateral organisation then expected a bounce to 3.2% next year.
SA is forecast to see stronger economic growth in 2012, underpinned by favourable external demand, continued fiscal stimulus and rising consumption driven by higher wages. The UN forecasts growth of 3.1% in 2011 rising to 3.7% in 2012 before easing to 3.5% in 2013.
The SA Treasury in October 2011 forecast SA growth at 3.1% in 2011 rising to 3.4% in 2012 and 4.1% in 2013, but warned that this was dependent on global growth.
"The world economy is teetering on the brink of another major downturn. Output growth has already slowed considerably during 2011 and anaemic growth is expected during 2012 and 2013. The problems stalking the global economy are multiple and interconnected. The most pressing challenges lie in addressing the continued jobs crisis and declining prospects for economic growth, especially in the developed countries. As unemployment remains high, at nearly 9%, and incomes stagnate, the recovery is stalling in the short run owing to the lack of aggregate demand. But, as more and more workers are out of a job for a long period, especially young workers, medium-term growth prospects will also suffer because of the detrimental effect on workers' skills and experience," the semi-annual World Economic Situation and Prospects report said.
Under the UN's pessimistic scenario, global growth would slow to 0.5% this year from an expected 2.8% in 2009 and 4.0% in 2010 when growth rebounded from a 2.4% contraction in 2009. In its optimistic scenario global growth would rise to 3.9% this year and 4.0% next year.
A recession in either Europe or the US might not be enough to induce a global recession, but a collapse of both economies most likely would. In the pessimistic scenario of the UN forecast for 2012, the economy of the European Union (EU) would decline by 1.5% and that of the US by 0.8%. Developing economies and the economies in transition would likely take a significant blow.
The impact would vary as their economic and financial linkages to major developed economies differ across countries. Asian developing countries, particularly those in east Asia, would suffer mainly through a drop in their exports to major developed economies, while those in Africa, Latin America and western Asia, along with the major economies in transition, would be affected by declining primary commodity prices.
In addition, all emerging economies would have to cope with large financial shocks, including a contagious sell-off in their equity markets, reversal of capital inflows and direct financial losses because of the declining values of the holdings of European and US sovereign bonds, which would affect both official reserve holdings and private sector assets.
A major issue facing governments around the world was that of youth unemployment as this age cohort resorts to violence more often than other age cohorts.
Unemployment rates among youth (persons 15-24 years of age) tend to be higher than other cohorts of the labour force in normal times in most economies, but the global financial crisis and its subsequent global recession have increased this gap disproportionally.
Keeping in mind data limitations, the jobless rate among young workers increased from an estimated 13% in 2007 to about 18% by the first quarter of 2011. The situation remains particularly acute in some developed economies. In Spain, an astonishing 40% of young workers are without a job.
A quarter or more of the youth in Western Asia and North Africa and one fifth of those in the economies in transition are unemployed. In other developing regions, too, youth unemployment has increased more than that of other age groups. Latin America and the Caribbean, in particular, have experienced significant increases in youth unemployment since 2008, although the situation started to improve in the first half of 2011. In south and east Asia and Africa, young workers have a high probability of facing vulnerable employment conditions.
In order to restore pre-crisis employment and absorb the new labour entrants, an employment deficit, estimated at 64 million jobs in 2011, would need to be eliminated. With the global economic slowdown projected in the baseline and growth of the workforce worldwide, however, this deficit would increase further, leaving a job shortage of about 71 million, about 17 million of which would be in developed countries.
If economic growth stays as anaemic in developed countries as projected in the baseline forecast, employment rates will not return to pre-crisis levels until well beyond 2015.
Persistent high unemployment is holding back wage growth and consumer demand globally and pushing up delinquency on mortgage payments in the US. Combined with continued financial fragility in the developed economies, it is also depressing investment demand and business confidence and holding back economic recovery further.
The recovery of world trade slowed down in 2011 as growth in merchandise trade declined to 6.6% from 12.6% in 2010. In the baseline outlook, world trade growth will continue at a slower pace of 4.4% and 5.7% in 2012 and 2013, respectively. Feeble global economic growth, especially among developed economies, is the major factor behind the deceleration.
Developing countries were more resilient to the crisis and their importance in world trade continues to increase. Between 1995 and 2010, their share in world trade volume increased from 28.5% to 41.2%. In 2011, they led the recovery of external demand by contributing to half of world import growth, compared with 43% on average in the three years prior to the 2008 crisis.
The shifting patterns of trade are associated with the rapid industrial growth in major developing countries. Between 1995 and 2011, South-South trade increased at an annual rate of 13.7%, which was well above the world average of 8.7%.
For many commodities, the rising trend in prices that started in June 2010 extended into 2011. After peaking during the first half of the year, prices declined slightly. However, in the case of oil, metals, agricultural raw materials and tropical beverages, average price levels for the year 2011 as a whole surpassed the record averages reached in 2008. In the outlook, commodity exporters that have benefited from improved terms of trade (like SA) over the last two years remain exposed to downward price pressures, which may be significantly amplified by financial speculation in the event of a double-dip recession.
Although financial speculation has been on the agenda of several international forums in 2011, including the Group of Twenty (G20), no decisions have thus far been taken at the international level to better regulate commodity futures markets.
In 2010, services trade returned to positive growth in all regions and groups of countries, especially developing countries, particularly the least developed among them. As trade in services has shown less sensitivity to the financial crisis compared with trade in merchandise, its rebound was also less pronounced in 2010 and 2011. Developing countries remain net services importers, but their role as service exporters is continuously growing, especially in the transport and tourism sectors.
In the context of stalled multilateral trade negotiations in the Doha Round, bilateral trade agreements among (sometimes unequal) partners are proliferating and the notion of a "variable geometry" approach in World Trade Organisation (WTO) negotiations is finding some support among member States. These developments also put at risk the unconditional most favoured nation (MFN) clause, which has been the cornerstone of the multilateral trading system since its inception at the end of the 1940s.
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