Mid-Year Review and Prospect of 2010 World Economic Situation

  2010/7/28 source：

Chinese President Hu Jintao pointed out at the G20 Toronto Summit that the world economy is gradually recovering, but the recovery was unfirmly established, unbalanced, and still facing quite many uncertainties, This general statement clearly depicts the complex situation the world economy faces. First of all, the economic recovery was largely a result of monetary and financial stimulus policies; private sectors have not been fully activated. Thus, the foundation of the recovery is not firm enough. Secondly, the process of world economic recovery shows a coexistence of different speeds. Asian countries and emerging markets maintain a good momentum; the United States is slowing down after a period of rapid recovery; European countries are not performing well due to sovereign-debt crisis. Last but not least, the risk and uncertainties in the world economy are rising; the Euro Zone’s debt crisis might still spread to other European countries; the US economy is facing the risk of “a double dip;” emerging market countries need to cautiously prevent the overheating and inflation.

I. An Overview of the World Economy in the First Half of the Year

 Generally speaking, the momentum of world economic recovery is better than expected. In view of the recent economic situation, the world economic recovery has experienced different stages. From the end of 2009 to the first quarter of 2010, the world economy maintains a stable recovery momentum. The rapid rebound of industrial manufacture and international trade exceeded expectations; during this period, the theme of policy was “when to implement the exit strategy.” However, due to the breakout of the Greek crisis in May and the following up Euro zone sovereign-debt crisis, turbulence appeared in the international financial market and a gloom cast over the world economic recovery. Now the focus of discussion had turned into “which comes first? Budget stabilizing plan or continuation of economic stimulus policy?” In fact, this has become a dilemma for governments in making macroeconomic policies. 

II. Prospect of the World Economy

1. The world economic growth in 2011 will slow down.

2. Emerging markets and Asian countries and regions will remain fast growing, but they must be cautious about the shock of short-term foreign capital and the risk of economic overheating.

3.The Euro zone’s sovereign-debt crisis caused the turbulence in the international financial market; debt to deficit ratio in developed countries becomes the biggest risk and uncertain factor in the future economic recovery.

 

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