World economy still improving, but at a slower pace, ICC/Ifo survey reveals
The world economy continued its rebound from the worst recession in decades, according to the quarterly ICC/Ifo World Economic Survey released today. However, some regions, notably North America and Asia, saw slowing growth and there was a marked difference in growth prospects among regions.
Results of the Survey were compiled from questions submitted to 1,103 experts in 116 countries. The questionnaire focused on assessments of a country’s general economic situation and expectations regarding important economic indicators.
Worldwide, the economic climate indicator fell slightly, from 104.1 in the second quarter of 2010 to 103.2 in the third quarter. This was largely the result of a decline in the indicator numbers in two important regions, North America and Asia. But the overall figures still show a substantial gain from the third quarter of 2009, when the world economy indicator stood at 79.6.
Western Europe, which appeared to be slowing in the previous survey, showed surprising strength in the latest one. Germany, spurred by surging exports, was the engine of Euro zone growth. The country, whose economy grew by 2.2%, experienced its strongest quarter since German unification in 1990. However, the future outlook for Europe is tempered by a deepening recession in Greece and continuing restructuring programmes in Spain, Portugal and Ireland.
In North America, by contrast, the last quarter saw growth losing momentum. Stubbornly high unemployment in the US, coupled with weak private consumption and capital expenditures, led to an outlook rated less than satisfactory by the experts polled. The US Federal Reserve, having already lowered interest rates to near zero, recently indicated it may now reinvest the proceeds from maturing securities in long-term government bonds, a reversal of its previous policy. The Canadian economy, while currently rated satisfactory, is expected to slow later in the year.
The news from Asia is dominated by indications of a slowing in the Chinese economy. While China’s growth rate remains impressive, a recent slackening in retail sales and a weakening of imports, along with the government’s withdrawal of an expansionary monetary policy, point to a cooling economy in the months to come. Elsewhere in Asia, a favourable economic climate prevails in Thailand, Malaysia and Sri Lanka, with capital expenditures, private consumption and exports in these countries projected to pick up further.
The African economy shows sharp contrasts between a positive outlook for South Africa, Kenya and other countries and a weakening scenario for Tanzania, Gabon and Madagascar. South Africa received a boost from hosting the World Cup, and its private consumption and exports are expected to show further improvement, though capital expenditures, which were largely linked to World Cup construction, are projected to level out.
In response to a question concerning the outlook for cross-border trade and investment, the survey showed that private consumption, which is key to growth in these fields, remained weak, impacted by high rates of unemployment. Another factor limiting trade was the lack of access to trade finance in countries such as Spain, Bulgaria, the Czech Republic, Hungary and Romania. This has been a subject of particular concern to ICC.
These factors – added to protectionist pressures in countries such as Germany, Denmark and Norway – are contributing to the cloudy outlook for trade and investment.
The quarterly World Economic Survey is conducted by the Munich-based Ifo Institute in cooperation with ICC. It provides rapid, up-to-date assessments of the economic situation prevailing worldwide.