|
World economy in a depressed condition:
Greater integration vital to face external shocks - Prof. Abeyratne
By Lalin FERNANDOPULLE
The world economy is in a depressed condition in the current year
mainly due to the Sovereign Debt crisis in the Euro Zone, but emerging
conditions show a slow recovery next year said Senior Lecturer,
Economics, University of Colombo Prof. Sirimal Abeyratne.
 He said that the world economy made a strong recovery from the US
financial crisis recording 5.3 percent economic growth in 2010, but
started to slow down thereafter, recording a 3.9 percent growth last
year. The world economic growth will slow down further to 3.5 percent
this year, according to the IMF World Economic Outlook Projections
(April 2012).
Prof.Abeyratne said that while the US economy is likely to improve
its output growth, the economy of the Euro Zone is heading towards a
contraction.
The US and the Euro Zone which together account for about half of the
world output (despite less than 10% population) have a bearing impact
over the rest of the world.
Therefore as pluses and minuses get cancelled, the net growth outcome
would be too small to make a substantial contribution to the economies
of the rest of the world.“However,along with the US economy, some other
advanced countries, including Japan and UK, are likely to improve their
output growth this year”, he said. The intervention of the European
Central Bank in providing refinancing operations and the fiscal reform
programs of the European governments appear to have eased the debt
crisis.
Although, the current year 2012 is due to suffer from the Euro
crisis, with an improvement in investor confidence the Euro Zone is on a
slow recovery path.
“The threat of a sharp global slowdown eased with improved activity
in the United States and better policies in the euro area.
Weak recovery will likely resume in the major advanced economies, and
activity will remain relatively solid in most emerging and developing
economies. However, recent improvements are very fragile” the Outlook
stated.
Given the gloomy economic outlook of the world economy, the
developing countries in the Asian region have also revised their growth
projections downward.
Developing Asia is currently the fastest growing region in the world,
while the higher growth of the two largest economies in the world (China
and India) sustains growth of the Asian region. Along with other
countries in the region, Sri Lanka has also downgraded its growth
targets for the year 2012.The Central Bank downgraded Sri Lanka's
economic growth this year to 7.2 percent from its forecast eight
percent.Economic growth in Germany will slump from 2.7 percent to 1.3,
France from 1.7 percent to 1.4, Italy from 0.6 to 0.3, China from 9.5 to
9.0, India from 7.8 to 7.5, Latin America and the Caribbean from 4.5 to
4.0 and the Middle East and North Africa from 4.0 to 3.6 percent,
according to the IMF.
Prof. Abeyratne said that the current economic downturn in the world
as well as the volatile nature of the world economy experienced in the
past few years have led the developing countries such as Sri Lanka to
choose between two alternative policy options: the first is the greater
reliance on the “domestic” economic activities in the context of
increased protectionism, anticipating to avoid adversaries of the
external shocks; the second is the greater integration with the global
economy through trade and investment, anticipating to stand strong
against external shocks.
|
