World economy to improve only slightly in 2013
London, October 12, 2012
Next year offers only a slight improvement for a global economy hit by recession in Europe and slowing or moribund growth in Asia and the US, according to Reuters polls of hundreds economists worldwide.
After reaching 3.1 percent this year, world economic growth is expected to hit 3.4 percent in 2013, polls released on Thursday said - a slight cut from July's poll and slower than the International Monetary Fund's latest forecasts of 3.3 percent and 3.6 percent.
While few expected 2012 would be anything other than a difficult year for the world economy, there had earlier been some hope a resilient US and faster-growing emerging markets would keep up the momentum.
This view has changed with economists polled over the last week saying at least some of the weakness will inevitably spill into next year.
Much will hinge on whether China, Asia's largest economy, can pull out of its downtrend this year, and if the euro zone can contain its prolonged debt crisis.
"As we've moved further through 2012, the assumption we've generally worked off - that next year's got to be better than this - is fading rapidly," said Victoria Clarke, economist at Investec in London.
She cited a few big risks for next year, including the prospect of deep automatic spending cuts in the United States, the so-called fiscal cliff, which would immediately crimp on growth unless politicians agree a deal to avert it.
"We think they'll find some sort of compromise on that. But there are plenty of smaller drags on global growth through next year - there's no question the euro crisis is going to continue," said Clarke.
Europe is expected to remain the biggest drag on the world economy next year, as its sovereign debt crisis continues to stew.
The predicted five worst performing economies in 2013, out of the 19 covered in the poll, are all European, with Italy bottom of the stack.
And the euro zone economy may have to wait until 2014 before it recovers from its decline this year, as few analysts polled by Reuters expect anything other than feeble growth in the quarters ahead.
Only 17 of 71 economists polled said it will grow enough next year to cancel out the 0.5 percent decline predicted for 2012. The consensus was for 2013 growth of just 0.3 percent next year, in line with last month's poll.
The survey suggested recent aggressive action taken by the European Central Bank will not alone be enough to put the euro zone back on a sound economic footing.
Still, easy monetary policy elsewhere in the world should help foster better growth, without really propelling it.
NEW YEAR HANGOVER
Prospects for the US, the world's biggest economy, have dimmed only slightly for the first part of next year, suggesting it will maintain its plodding recovery.
Economists cut their median growth forecast to an annualised 1.6 percent for the first quarter of 2013, compared with 1.7 percent last month, and to 2.1 percent for the second quarter from 2.3 percent.
"I don't think we are going to get significantly slower from here but that depends on what happens in fiscal policy towards the end of the year," said Jay Bryson, global economist at Wells Fargo Securities in Charlotte, North Carolina.
The poll showed the vast majority of economists - 29 of 31 -believe politicians will agree to stop January's automatic trigger of $600 billion of tax hikes and spending cuts.
That would avoid precipitating what the Congressional Budget Office has warned could be "a significant recession" and the loss of about 2 million jobs, a scenario already suffered by some major European economies.
Europe's slump has cast a big shadow over export-reliant Asian economies, which will likely register another year of weak growth in 2013.
Forecasts for nearly all of the 12 Asian economies polled in October were downgraded from the last quarterly poll conducted in July.
"Next year will probably be quite a difficult year for most Asian economies," said Vishnu Varthan, economist at Mizuho Corporate Bank.
"A lot of these economies still have their umbilical cords tied to China and whether China eases policy and its magnitude will probably decide the course of growth in the region."
China is scheduled to publish third-quarter GDP data next week, with investors anticipating a seventh straight quarter of slowing growth.
Still, the likes of India and Indonesia will remain among the world's fastest growing major economies next year. - Reuters