The emerging markets will be pivotal in staving off another global recession, according to The Conference Board of Canada’s World Outlook, Autumn 2010.
The report predicts that the global economy will finish 2010 with 3.6% growth, before slowing to 3.3% in 2011, with economic weakness in much of Europe, the United States and Japan acting as a brake.
“While solid growth in Asia and Latin America is keeping the global economy chugging along, growth in industrialized countries will have to solidify if the world economy is to sustain the recovery,” said Kip Beckman, principal economist with the Conference Board.
Most of the Asia-Pacific region (ex-Japan), has already returned to growth, and real GDP is expected to grow by 6.3% this year, with tighter monetary policy and slower exports cutting growth to 5.1% in 2011.
Meanwhile, Latin American economies will benefit from strong domestic and foreign demand, and real GDP will grow by 5.1% this year, cooling to 4% in 2011.
The European debt crisis—typified by Greece—will be the major drag. European governments must strike a balance between reining in spending on the one hand and further stimulating their economies on the other. In this environment, interbank lending is at a virtual standstill, which means business and personal credit also remains tight.
Against this backdrop, the Conference Board forecasts that the European economy will likely grow by only 1.6% in 2010 and 1.4% in 2011.