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Global Economic Outlook, Q3 2013: Japan

Global Economic Outlook, Q3 2013: Japan

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Published by: Deloitte University Press on Aug 01, 2013
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GlobalEconomicOutlook
3rd Quarter 2013
 
Dr. Ira Kalish, chieglobal economist oDeloitte TouchTohmatsu Limited
T
HE
global economy continues to grow at a modest pace. Europe remains in recession, USgrowth remains subpar, and the major emerging markets ace slower growth. Meanwhile,global nancial markets have aced considerable volatility, owing to prospective changes in USmonetary policy, a new policy in Japan, and instability in China’s banking system. Indeed, Asia hasbeen at the oreront o economic news in the latest quarter. roubles in the Chinese nancial sys-tem and volatility in Japans nancial system have been leading the headlines in recent months.In this edition o the
Global Economic Outlook
, we examine the major issues conronting theglobal economy and discuss the likely outcome. We begin with my discussion about China. Iexplain the recent structure o the banking system, how the shadow banking system grew so rapidly,and the reasons why troubles emerged recently. I also discuss the response o the authorities andwhat must happen in the uture in order to restore growth and nancial stability.In the next article, I discuss Japans new economic policy, known as Abenomics, and the rea-sons why nancial markets became quite volatile in June. I also discuss how the economy appearsto be perorming better in the aermath o the new policy. I also look at the outlook or theJapanese economy and the conditions that must be met in the long run in order or the new policy to succeed.In our next article, Patricia Buckley attempts to explain Ben Bernanke’s attempt to explain hispolicy intentions. Bernanke’s recent comments on the possible uture path o monetary policy seto a rather notable round o nancial volatility. Patricia examines the impact o monetary policy and the likely outlook or the US economy. She also discusses the impact o scal policy.In his review o the Eurozone outlook, Alexander Boersch notes the dierence in perormancebetween European nancial markets and European economic growth. Financial market health hasimproved, in large part due to ECB policy. Yet the economy remains mired in recession. Alexandersays that Europe’s economy is too dependent on exports, especially to emerging markets, and musthave other sources o demand in order to generate sustainable growth.Next, Alexander ocuses on the long-neglected European consumer and the role that consumerswill play in the outlook or the Eurozone economy. Alexander suggests that the European consumerremains hobbled by debt and continues to engage in deleveraging. As such, it is unlikely that they will play a major role in economic recovery. Rather, other sources o growth, including investmentsand exports, will be required.
Global EconomicOutlookQ3 2013
2
 
In his article on the British economy, Ian Stewart suggests that Britain may beturning the corner. He notes that the consumer sector and the corporate sectorhave both shown unexpected strength. Ian notes that an aggressive monetary policy has provided the uel or consumer wealth, consumer spending, and bettercredit market conditions. On the other hand, he says that the economy continuesto ace substantial headwinds rom global weakness, tight scal policy, and globalnancial market volatility.In her article on India, Rumki Majumdar says that, while the old challenges toIndias economy continue, new challenges are emerging. Te end result is that theoutlook or growth is not good. Among the challenges are uncomortably highination, a big budget decit, a large external decit, and capital ight, whichresulted rom actions by the Federal Reserve in the United States. Capital ighthas contributed to currency depreciation, exacerbating ination and constrictingthe ability o the central bank to ease policy.In our next article, Akrur Barua provides a discussion about the Russian econ-omy. He notes that the main strength o the Russian economy has come rom the consumer sector.Increasing wages and consumer willingness to borrow have ueled spending growth. However, highination has led the central bank to tighten lending conditions. Moreover, muted global demand orcommodities has had an adverse eect on growth. Te outlook, thereore, remains uncertain.Finally, Navya Kumar looks at the Brazilian economy, which is struggling to grow. Te rapid shirom strong to weak growth has certainly taken a toll in terms o popular discontent. Mass demon-strations reect rustration with poor inrastructure, corruption, and inefciency. Sadly, the outlook is hampered by high ination, weak overseas demand, and volatile and interventionist public poli-cies that have hampered business investment.
Dr. Ira KalishChie Global Economist oDeloitte Touch Tohmatsu Limited
Global Economic Outlook 
published quarterly byDeloitte ResearchEditor-in-chief 
Dr. Ira Kalish
Managing editor
Ryan Alvanos
Contributors
 Dr. Patricia BuckleyDr. Alexander BörschIan StewartDr. Rumki MajumdarAkrur BaruaNavya Kumar
Editorial address
350 South Grand StreetLos Angeles, CA 90013Tel: +1 213 688 4765ikalish@deloitte.com
Preface
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