THE GLOBAL recovery "is in danger of skidding off course", according to the latest Brookings Institution- Financial Timestracking index of the world economy, with growth slowing sharply amid financial turbulence and policy paralysis.
The gloomy prognosis applies across the Group of 20 leading economies, the Tiger index shows, although the slide back towards stagnation is much more prevalent in the advanced world compared to emerging economies. Prof Eswar Prasad of the Brookings Institution said: “Debt crises, weak employment growth and policy dithering in the major advanced economies have exacerbated global economic uncertainty.”
The Tiger index combines measures of real economic activity, financial variables and indicators of confidence according to the degree to which they are all moving up or down at the same time. It can capture movements of data measured on different bases and across many countries.
The financial market component of the indicator has been hard hit, reflecting widespread anxiety in markets since the spring and the lack of rapid resolution to uncertainties hanging over the euro zone and the US debt ceiling.
Mr Prasad said that in the US, “political wrangling and weak employment growth have contributed to declines in business and consumer confidence, with these factors feeding off one another and stunting the recovery”.
Japan’s economy has been reeling from the effects of the earthquake and tsunami, while in Germany, the fastest growing advanced economy, employment growth has levelled off and the euro zone crisis has dented business and consumer confidence.
The real economies of emerging countries of the G20 have performed better, with China still leading the way with continued rapid growth, punctured only by domestic tensions between high inflation and the desire to promote demand.
India’s financial sector has slowed, while industrial production growth has cooled in Brazil. “Emerging markets may find it difficult to continue being the drivers of global growth for much longer if advanced economies’ policies fail to restore their own economic growth and, instead, just add to global financial instability,” Mr Prasad said.– (Copyright The Financial Times Limited 2011)
