Economic Outlook: Global

Under the theme “Delivering on Africa’s Promise”, the 23rd World Economic Forum (WEF) on Africa will provide an important platform for regional and global leaders from business, government and civil society to deepen the continent’s integration agenda and renew commitment to a sustainable path of growth and development. 

Global Overview:

As of April 2013, the global economic growth outlook seemed to have shown some improvement, however, the current bullishness in global stock markets has not come as a result of confidence in economic fundamentals, but rather the effects of major central banks using their domestic portfolio balance channels to reflate risky assets.

Bank of Japan uses a “Monetary Bazooka”

Most recently, the planned use of a “monetary bazooka” by the Bank of Japan (BoJ) in order to achieve 2% inflation has essentially confused markets, with agents attempting to pre-emptively act on the potential success or failure of the BoJ, while also trying to determine what effects the actions will have on the domestic Japanese economy and Japanese debt markets.

On the contrary, the latest Federal Open Market Committee (FOMC) meeting has hinted at the possibility of halting quantitative easing later in the year. This will be dependent on US labour market conditions, and thus should follow economic growth developments instead of being a direct cause thereof.

Furthermore, it is unlikely that financial markets in the US will suffer from quantitative easing withdrawal symptoms while their counterparts in Japan indulge in an overdose.

China enters an era of slower growth

Meanwhile, disappointing data in the global growth engine, China, has rekindled debate over whether further policy support might be forthcoming from the Chinese authorities.

The explicit recognition by Chinese authorities that China has entered an era of slower growth and must adjust to the end of three decades of double-digit annual economic expansion, might raise some concern. However, the authorities have also stated that the current economic model is unsustainable, which could mean domestic consumption in China will play a more prominent role in the economy, which would, in turn, be beneficial to other countries that are able to satisfy this consumption.

With major economies such as Brazil slashing 2013 gross domestic product (GDP) growth forecast from 4.5% to 3.5%, and Russia cutting 2013 GDP growth from 3.6% to 2.4%, China will continue to be the primary driver behind global economic growth. China will be supported by Japan, with the planned fiscal stimulus and monetary easing reflected in the International Monetary Fund’s (IMF) new forecasts for the world’s third-largest economy, which were raised to 1.6% from 1.2% for 2013, and to 1.4% from 0.7% for 2014.

World Growth Forecasts

Our world growth forecasts have been lowered slightly for 2013, primarily due to base effects in the new model.

When incorporating our lower 2013 euro zone forecasts, the total contribution of the euro zone to world growth is -0.047 percentage points. The contribution of China alone is 0.978 percentage points in 2013, meaning events in China will have a much larger effect on world growth than individual euro zone countries. We expect world growth to increase to 3.4% in 2013 from 3% in 2012. An improvement in the euro zone and the US should see world growth reach 4% in 2014.

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About Femi Oke

Relentless passion for creativity and digital acumen to help a professional services firm thrive in the digital space. Femi is an individual with a rich experience on regional African knowledge, its diverse business culture and he understands the continent’s economic drive. He thrives on selfless service and lasting mutually beneficial relationships with colleagues and especially clients encountered in the course of his duties. He is creative, practical and self-motivated with business judgement in corporate, brand and strategic communications, social, digital & traditional media and executive profiling. Roles in the firm include New Media, Digital Communication, Corporate Communication, executive profiling and Brand Management execution. Working on the multi-million dollar Africa high growth market project stands out for femi; besides this, managing all KPMG’s digital communication for the World Economic Forum on Africa is another project that gives him great delight. Femi holds a Masters Degree in Global Marketing from the University of Liverpool.

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