By Claire West
The developing economies are continuing to power the growth of the global economy, while most developed economies are struggling in the face of high unemployment and waning consumer demand.
These are just some of the findings in the latest report from PricewaterhouseCoopers LLP UK-based Economics team, as it forecasts global GDP growth to be 3.5% this year and 3.1% in 2011.
The report highlights the gap in performance and prospects between the developing and the developed world. Of the major emerging economies, China and India in particular are expected to continue their impressive growth in 2010 and 2011; for China, this forecast translates to 9.6% this year and 9.3% next, with the Indian economy set to grow by 8.6% this year and 8.5% next.
But it’s a very different picture in the developed economies. The climb out of recession in the Euroland is slow and painful for many countries, with high unemployment and upcoming austerity measures likely to dampen growth prospects. Germany, however, bucks the trend, with its forecast GDP growth at 3.3% this year — more than double the forecast growth figure for Euroland as a whole.
Slow return to growth
Meanwhile, the US economy is slowly returning to growth, despite persistently high unemployment and continuing fears over deflation. The central banks of the US, the UK and Japan have all indicated they may turn to quantitative easing (QE) in a bid to provide an extra boost to econ0mic recovery.
Yael Selfin, Head of PwC’s Macro Consulting team, says: “Consumers are feeling the after-effects of the recession, with confidence surveys painting a picture of concerned consumers across many economies. In the US, for example, stubbornly high unemployment (above 9%) is combining with weakly recovering house prices and an uncertain fiscal outlook to dampen confidence.”
And the latest round of business confidence results shows a similar pattern. “So far this year, business confidence has been stagnant in the US, while confidence levels in Japan and the Euroland appear to be continuing a slow recovery towards pre-crisis levels,” says Yael.