2013, like 2012, looks like it could be a tale of a two-speed global economy. The industrialised nations will struggle with growth, while developing economies – particularly in Asia and sub-Saharan Africa – will again be the fastest growing economies. In a sense this is not surprising given the debt burden many Western governments are grappling with, but the prolonged period of relative decline in the West which we have seen over the last five years is starting to look like what some commentators are now labelling the ‘new normal’.
In RSM’s latest Talking Points publication, David Bartlett, an economic adviser to RSM, produces a neat overview of global economic trends. The Eurozone, while managing to claw itself back from the precipice, is unlikely to achieve significant growth in 2013. The United States, although averting fiscal calamity at the start of the year, still has unsustainable levels of debt that imperil economic recovery. On the plus side, the shale oil and gas boom could lead to a dramatic change in the U.S. energy landscape, help to deliver cheap energy for industry and consumers, and drive economic growth.
The major emerging markets should deliver improved growth in 2013, though looking beyond the BRICs, ‘second tier’ emerging markets are worth watching. According to the International Monetary Fund, Asian markets will grow; Indonesia (6.3%), Thailand (6%), Vietnam (5.8%) and Kazakhstan (5.7%) are all forecast to perform well. Sub-Saharan Africa has its star performers too: Mozambique (8.4%), Ghana (7.8%), Tanzania (6.8%), Nigeria (6.7%) and Kenya (5.6%).
The basic pattern – slow growth in developed economies, strong growth in emerging markets – is likely to be the defining characteristic of the global economy for the medium term. David Bartlett lists three key issues which developed countries will need to overcome to escape the slow growth trap: 1) the need for national governments to reconcile the requirement for fiscal austerity with economic growth; 2) the ability of industrialised economies to capitalise on commercial opportunities in fast-growing emerging markets; and 3) the capacity of developed economies to boost productivity. That’s quite a challenging ‘to do’ list, but apart from point ‘1’ eminently achievable. When the financial crisis broke, many commentators thought we would be in for a short, sharp recession. For the West, the burden of government debt has proved an enormous drag on growth, and is likely to be so for many years to come.