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World economic Status

World economic Status

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Published by Ashish Ben Ajay

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Published by: Ashish Ben Ajay on Mar 05, 2012
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11/09/2013

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World Economic Situationand Prospects 2012
Global economic outlook 
United NationsNew York, 2011
PRE-RELEASE
 
1
Chapter I
Global economic outlook 
Prospects or the world economy in 2012-2013
Following two years o anaemic and uneven recovery rom the global nancial crisis, the world economy is teetering on the brink o another major downturn. Output growthhas already slowed considerably during 2011, especially in the developed countries. Tebaseline orecast oresees continued anaemic growth during 2012 and 2013. Such growthis ar rom sucient to deal with the continued jobs crises in most developed economiesand will drag down income growth in developing countries.Even this sombre outlook may be too optimistic. A serious, renewed globaldownturn is looming because o persistent weaknesses in the major developed economiesrelated to problems let unresolved in the atermath o the Great Recession o 2008-2009.Te problems stalking the global economy are multiple and interconnected.Te most pressing challenges are the continued jobs crisis and the declining prospects oreconomic growth, especially in the developed countries. As unemployment remains high,at nearly 9 per cent, and incomes stagnate, the recovery is stalling in the short run becauseo the lack o aggregate demand. But, as more and more workers remain out o a job or along period, especially young workers, medium-term growth prospects also suer becauseo the detrimental eect on workers’ skills and experience.Te rapidly cooling economy is both a cause and an eect o the sovereigndebt crises in the euro area, and o scal problems elsewhere. Te sovereign debt crises ina number o European countries worsened in the second hal o 2011 and aggravated the weaknesses in the balance sheets o banks sitting on related assets. Even bold steps by theGovernments o the euro area countries to reach an orderly sovereign debt workout orGreece were met with continued nancial market turbulence and heightened concernso debt deault in some o the larger economies in the euro zone, Italy in particular. Tescal austerity measures taken in response are urther weakening growth and employmentprospects, making scal adjustment and the repair o nancial sector balance sheets allthe more challenging. Te United States economy is also acing persistent high unem-ployment, shaken consumer and business condence, and nancial sector ragility. TeEuropean Union (EU) and the United States o America orm the two largest economiesin the world, and they are deeply intertwined. Teir problems could easily eed into eachother and spread to another global recession. Developing countries, which had reboundedstrongly rom the global recession o 2009, would be hit through trade and nancial chan-nels. Te nancial turmoil ollowing the August 2011 political wrangling in the UnitedStates regarding the debt ceiling and the deepening o the euro zone debt crisis also causeda contagious sell-o in equity markets in several major developing countries, leading tosudden withdrawals o capital and pressure on their currencies.Political divides over how to tackle these problems are impeding needed,much stronger policy action, urther eroding the already shattered condence o businessand consumers. Such divides have also complicated international policy coordination.Nonetheless, as the problems are deeply intertwined, the only way or policymakers to savethe global economy rom alling into a dangerous downward spiral is to take concertedaction, giving greater priority to revitalizing the recovery in output and employment in theshort run in order to pave more solid ground or enacting the structural reorms requiredor sustainable and balanced growth over the medium and long run.
The world economy ison the brink o anotherrecessionThe problems are multipleand interconnectedPolicy paralysis has becomea major stumbling block 

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