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This recession was caused by a financial crisis, and what we do know about recessions caused by financial crises is that they are followed by very weak recoveries.
Achieving a “strong, balanced, and sustained world recovery” - requires two fundamental and difficult economic rebalancing acts according to IMF. First, internal rebalancing: When private demand collapsed, fiscal stimulus helped alleviate the fall in output. But fiscal stimulus has to eventually give way to fiscal consolidation, and private demand must be strong enough to take the lead and sustain growth.
As we approach the fourth anniversary of the start of the global financial and economic crisis the outlook continues to be bleak. The V-shaped recovery is now ancient history and the sustainable growth level that we hoped would settle high continue to show a sideways or even descending trend.
The year 2012 has been a turbulent one for the global economy and the outlook has deteriorated since our last forecast.
At this point in time, everything points towards a stronger and expanding global economy for 2013. This is the widespread opinion, reinforcing the belief that 2012 is the final trough of what might turn out to have become a W-shaped recovery.
... paving the way for a growth scenario, as the dark clouds just won’t go away before that happens. As the world continues to deal with severe economic challenges – a very fragile world economy and high volatility in the financial markets – the IMF slashed its forecast for global GDP growth across the board.
The recent optimism has fortunately not completely evaporated following the latest series of less positive economic indicators from across the globe, including India, the US, Brazil and Spain. The EU debt situation creates a lot of uncertainty, not only as regards economic development but also regarding the political situation on both sides of the Atlantic Basin.
The global economy is getting better. The dark clouds that were piling up towards the end of 2011 have now spread, as brisk winds of change are beginning to restore optimism. However, the economic crisis is still not over and many tough political decisions have to be made before we can stand on top of a sustainable recovery. Three factors give us reason to believe things are getting better:
2011 started out with a lot of optimism fuelled by a surprisingly better-than-expected growth in the second half of 2010. As the year has progressed it has turned into a paradise lost rather than the sustainable recovery we were all hoping for. Since the January issue of World Economic Outlook was released, IMF has reduced the growth expectations for the Global GDP and now expects only 4.0% growth in 2011. If this forecast holds true, it will be the slowest global growth since 2003 – if you discard the crisis-years of 2008 and 2009. Slashing not only its 2011-estimate, the 2012 outlook has been further lowered, cutting a 0.5%-point off the previously expected 4.5%. Growth is not only slowing down, it is also more unevenly distributed. The growth in advanced economies is now set for 1.6% as compared to an estimate of 2.4% 20 months ago. In contrast, Emerging and Developing economies are up 0.1 to reach 6.4 as compared to 20 months ago.
Global recovery advances but remains uneven, with two main tracks. In advanced economies, activity has tempered less than expected, but growth remains
