Emerging markets will sustain global economy

OTTAWA: Rapid growth in developing countries will prevent the world economy from slipping into another recession, according to The Conference Board of Canada’s World Outlook – Autumn 2010.

“There is a huge disparity in growth in the global economy. Emerging markets are generally experiencing rapid growth, and developed countries are mired in uncertainty,” said Kip Beckman, Principal Economist. “While solid growth in Asia and Latin America is keeping the global economy chugging along, growth in industrialized countries will have to solidify if the world economy is to sustain the recovery.”

The global economy will expand by a modest 3.6 per cent this year and slow to 3.3 per cent in 2011, restrained by weakness in much of Europe, the US and Japan. The outlook is being held back by ongoing financial and fiscal turbulence that was initiated by the crisis in Greece.

In Europe, governments are walking a fine line between the need to re-balance their books, and the desire for additional stimulus to deal with their underperforming economies. In addition, many banks in Europe are reluctant to lend to one another, which has tightened credit for businesses and consumers. Real gross domestic product (GDP) in Europe is forecast to expand by 1.6 per cent this year and 1.4 per cent in 2011.

With the exception of Japan, countries in the Asia-Pacific region have made a rapid transition from recession to recovery and solid growth. Fueled by fiscal stimulus programs, rock-bottom interest rates, and a buildup of inventories, real GDP in the region is forecast to grow by 6.3 per cent this year. In 2011, tighter monetary policy and restrained export demand will moderate growth to 5.1 per cent.

Strong domestic and foreign demand is fueling many of the economies in Latin America. Real GDP in Latin America is expected to increase by 5.1 per cent this year before growth cools down to around four per cent in 2011.

Read World Outlook: Global Economic Trends and Prospects: Autumn 2010