Supported by a surplus of central bank liquidity, the world has side-stepped numerous hazards and grown at a steady, though unspectacular, pace since 2010, new data has confirmed.
According to international market analysts, the world economy is set to do it again in the coming year, slowed by the U.K. vote to leave the European Union (Brexit).
“We might end up losing perhaps a quarter percentage point off” world growth as a result of Brexit, said David Hensley, Director of Global Economics for financial services group JPMorgan Chase & Co. in New York.
“That’s not enough to knock us out of the 2 to 3 percent channel we’ve been operating in recent years.” Coming after the deepest recession since the Great Depression, the slow-motion expansion has failed to extinguish the lingering anxiety of consumers and companies scarred by the crisis. That has led both groups to hold back on their spending, in turn retarding the strength of the upswing.
“It’s been a disappointing expansion, just drifting along,” said Peter Hooper, Chief Economist for Deutsche Bank Securities Inc. in New York and a former Federal Reserve official.
It has, however, been sufficient to reduce joblessness, especially in the U.S., he noted.
Central banks have already pushed monetary policy to its limits, cutting interest rates below zero in some countries and buying up bucket-loads of government bonds. Populist pressures fed by stagnating living standards are mounting, leading to the June 23 British vote to leave the EU and the rise of the unlikely duo of Donald Trump and Bernie Sanders as candidates for president in the U.S, Bloomberg reports.
The International Monetary Fund on Friday cut its 2017 growth forecast for the euro area to 1.4 percent from the 1.6 per cent it predicted in April, citing the U.K.’s vote. The Washington-based lender sees the region’s economy expanding 1.6 per cent in 2016. Though not stellar, such steady growth would still be a marked improvement from 2012 and 2013, when GDP contracted as the region struggled to contain a sovereign debt crisis.
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