Looking Ahead to 2013
As this year draws to a close, culminating in the festivities of Christmas and Old Year’s Night celebrations, economic agents are looking ahead to see what 2013 has in store. By any measure, economic performance in the industrialised world has been anaemic this year.
Indeed, during the second half of the year, growth slowed in emerging economies while Europe slipped into recession. As a consequence the global economy has sputtered throughout the year as policy makers, consumers and businesses contended with sluggish growth and high debt.
According to International Monetary Fund projections, the global economy is expected to grow by 3.3 per cent in 2012, down from 3.8 per cent in 2011 and 5.3 per cent in 2010.
Despite the high expectations for 2012, economic growth continued to slow in the midst of stubbornly high fiscal deficits, a debt hangover and, economic and geopolitical uncertainty in the United States, Europe and the Middle East. All indications are that when the sun sets on December 31, the economies of China, India, Brazil, Canada, Germany and France would all have experienced slower rates of growth relative to 2011.
Though the US economy would have grown by 2.2 per cent, up marginally from 1.8 per cent in 2011 and Japan, the world’s third largest economy would have recovered from its 2011 tsunami induced recession; the large economies of Italy, Spain and the United Kingdom would have sank into recession.
Economically, 2012 could be described as a year of mixed fortunes. In advanced economies, the sustained rise in the general price level (inflation) is expected to average 1.9 per cent for 2012. However, during the year, inflation has been higher in emerging market and developing economies, averaging 6.1 per cent. Interest rates were maintained at historical lows. This monetary policy stance is expected to continue into 2013.
The global economic environment is not expected to change very much next year. Barbadians can expect global economic growth of 3.6 per cent in 2013. The world’s largest economy is projected to continue along its modest growth trajectory with a 2.1 per cent advance in real output.
The good news is that the European Union and the UK in particular are forecasted to emerge from their recession. Britain’s economy is expected to grow by 1.1 per cent in 2013. Readers should bear in mind that the EU’s economy is second only to the US economy.
China, India, the ASEAN-5, Sub-Saharan Africa, and Brazil will continue to lead global economic expansion in 2013, advancing at rates of 8.2 per cent, 6.0 per cent, 5.8 per cent, 5.7 per cent and 4.0 per cent respectively. The ASEAN-5 refers to Indonesia, Malaysia, the Philippians, Thailand and Vietnam.
Closer to home, Canada’s economy should expand by 2.0 per cent in 2013, while Japan is projected to grow by 1.2 per cent.
The IMF’s forecasts suggest that commodity prices, including oil, will fall during 2013. Consumer prices are expected to rise by another 1.6 per cent in advanced economies and 5.8 per cent in emerging market and developing economies.
In general, western economies have entered a period of slow growth. As we move closer to 2013, the global economy still faces significant headwinds. Notwithstanding the current forecast, the economic climate could be bolstered by a resurgent US economy if the US Government is able to avoid the Fiscal Cliff and yet invest in the nation’s crumbling infrastructure.
Consumer confidence in the US is showing signs of improvement, the housing market is emerging and corporations are sitting on piles of cash; poised to ramp up investment when confidence resurfaces. Progress on resolving the debt crisis in Europe could also augur well for a more prosperous 2013.
However, escalating conflict in Syria and the West Bank has the potential to scuttle a global economic revival if the United States and Iran are drawn into the conflict. Uncertainty still reigns supreme.
What does all of this mean for Barbados? As you can see the international environment is not expected to be much better in 2013 than it has been this year. Looking at the cup half full, Barbados only needs a tiny portion of the global economic pie in order to generate foreign exchange-led sustainable economic growth and development. The fact that the global economy and key trading partners are expected to grow in 2013 is positive.
Economic actors in Barbados can either carry on as they have been, aim for stability and reap stagnation, or they can aim for modest growth of two per cent in 2013 by changing course. That is, making the requisite reforms to government, business, and international marketing initiatives and of course by reducing taxation and boosting domestic and foreign direct investment. Let’s hope for a brighter tomorrow.
Carlos R. Forte is a Commonwealth Scholar and Barbadian economist with local and international experience. [email protected]