Uncertainty in the global economy, primarily a result of questions surrounding policy decisions in the Eurozone and United States as well as the potential for conflict in Iran, is affecting global economic growth prospects. Growth projections for 2013 continue to fall as worries over fiscal consolidation, financial weakness, and high levels of public indebtedness in advanced economies put downward pressure on global growth. In emerging markets, activity has been slowed by weaker demand from advanced economies, policy tightening in response to capacity constraints, and country specific factors. However, emerging markets are now better positioned to be resilient in the face of crisis compared with 2008, due to policy improvements in the fiscal and monetary space.
As financial markets continue to react to the re-election of Barack Obama, emerging markets globally have a keen eye on the developments surrounding the upcoming US Fiscal Cliff. The impacts of automatic spending cuts and tax increases would be seen worldwide, as declining US demand would affect export-dependent economies across the globe. Lower aggregate demand would also yield downward pressure on commodity prices as global manufacturing decelerates, further damaging economies that are dependent on commodity exports. FSG predicts that emerging market oil exporters could witness drastic reductions in real GDP growth, as much as a .8% decline in 2013.
Even with all of the uncertainty in the global economy, FSG has identified a number of emerging markets countries that nonetheless are expected to exhibit strong growth in 2013. These markets tend to fall into one or more of the following buckets:
Improved political stability
- E.g. Vietnam, Thailand
Ample fiscal cushion
- E.g. Angola, Qatar
Relatively insulated from the Eurozone
- E.g. Philippines, Malaysia
Large domestic populations with a booming middle class
- E.g. China, India, Indonesia
In my next post, I’ll discuss some of the implications of the Eurozone debt crisis and a potential conflict involving Iran on emerging markets growth prospects for 2013.
World economy is doing just fine. All the downward or upward start with US economy, and other countries just follow it. It can take upto one quarter to follow US economy. When ever US economy is in uptrend, products are ordered and it takes at least a quarter to see the effects in other countries. US’s economy is just doing fine with out any kind of DOTCOM or HOUSING bubble. Dow is double compare to early 2009 when Obama took office for 1st term. When Reagan came to power lot of dictators from Eastern Europian countries were gone, in case of Obama’s 1st term several dictators from middle east are gone.