Rashid Ahmed Mughal
Ever since the global economy witnessed deep crisis after 2007,the path to recovery has been slow, timid and frag-ile. Though some economists think we are way out of woods and label it remarkable but the fact remains that no country in the world achieved the same level of GDP growth as in pre-crisis era. It is still in the midst of a decade long slow growth environment characterized by an imminent productivity growth crisis. The looming labour short-age in mature economies and skill deficiencies in emerging markets will add further challenges to global economic prospects. Global growth lacks demand drivers and potential output is shrinking while uncertainty is increasing. The growth and outlook for 2017 and possibly further, according to “The Conference Board Global Economic Outlook”, USA, seems to be still stilled mired in mini-crisis, specially with regards to the role of increasing uncer-tainty and risk factors for investment and growth in the medium and longer term in different parts of the world. It also analyzed, if the information and communication technology sector growth will come to the rescue of the slow-ing global economy in the next decade.
The US economy continues at a dismal 2 percent growth rate, well below pre-recession levels of 2.5 to 3 percent. This prolonged stagnation results from an unprecedented “perfect storm” of factors: a tight labour market and a prolonged period of slow revenue growth. What’s worse, we see the possibility of another recession two to four years down the road. In the short term, businesses can expect to pay more for labour and to experience rising inter-est rates. Businesses considering investment should act now, and concentrate investments in automation and inno-vation to offset external negatives. Though nearly half of US workers (49.6 percent), the highest percentage since 2005, are satisfied with their jobs but the fact remains that turn around is still slow and shy. The tightening labour market may be partly responsible for this uptick in sentiment. The rise of the New Digital Economy is reshaping global labor markets. It offers opportunities, but also challenges in adjusting to labour shortages and changing demands for digital workers.
Europe’s resilience, proven during two rebounds from two recessions, seems to be weakening. This it owes to Brexit and the uncertainty around the EU, which endangers any fragile recovery. Add to that a half-dozen major elections this year in Europe. Political and policy uncertainty stifles the investment that is needed for growth. Businesses would do well to foster the EU and the single market, to leverage their diverse workforces, and to in-vest in digital technology.
Asia remains the fastest-growing region on the planet, but even this dynamic economy is slowing down. The pro-jection is a relatively healthy 4.7 percent growth rate for Asia in 2017 which seems to be better than 2016’s dismal 3.6 percent, but still remains far more sluggish than the 7.2 percent growth rate of the past decade. What is slowing Asian growth? Lower external demand for Asian goods for starters, and the inability to achieve sustainable growth after the explosive growth of the 1990s. Businesses operating in Asia can still find opportunities—if they take advantage of integration initiatives, and they prepare for uncertainty.
China will remain the growth engine for emerging Asia in 2017 albeit growing at a slower rate, says Goldman Sachs Research’s Chief Asia-Pacific Economist Andrew Tilton, with potential for additional gains from productiv-ity improvements in India, Indonesia and the Philippines. China’s ability to manage its financial imbalances and risks while keeping growth at reasonably stable trajectory is going to be key drive for the rest of Asia.
The global economy has now entered its sixth year of stagnation, and the growth outlook for 2017 shows a con-tinuation of this trend. A projected stabilization in energy and commodity prices may provide a small tailwind for resource rich economies in 2017, but the medium-term trend continues to be dominated by weaker growth in key inputs, notably investment and labour supply. Modest positive signals emerge from the base scenario showing some strengthening in qualitative growth factors, such as more advanced technology, improved labour force skills, and greater productivity. But those potentially favourable factors are under pressure from ongoing political, policy, and economic uncertainties around the world. With this risk inertia, caused by a wait-and-see attitude among cor-porate and governments, businesses have to prepare for more disruptions from geopolitical tensions, policy uncer-tainty, financial market volatility, and rapid changes in technology, but they also need to stay focused on leverag-ing the qualitative sources of growth with investment in technology and business productivity even—or espe-cially—in times of stagnation.
The World Bank is raising its 2017 forecast for crude oil prices to $55 per barrel from $53 per barrel as members of the Organization of the Petroleum Exporting Countries (OPEC) prepare to limit production after a long period of unrestrained output. Energy prices, which include oil, natural gas and coal, are projected to increase percent overall next year, a larger increase than anticipated in July 2016. According to World Bank senior economist and lead author of Commodity Markets Outlook, John Baffes “a solid rise in energy prices, led by oil, next year, is firm expectation. However, there is considerable uncertainty around the outlook as we await the details and the imple-mentation of the OPEC agreement, which, if carried through, will undoubtedly impact oil markets.”
“The outlook for developing East Asia and Pacific remains positive, with weakness in global growth and external demand offset by robust domestic consumption and investment,” said Victoria Kwakwa, World Bank Vice Presi-dent for East Asia and Pacific. “The long-term challenge is to sustain growth and make it more inclusive, including by shrinking gaps in income and access to public services, especially in China; improving infrastructure across the rest of the region; reducing persistent child malnutrition; and harnessing the potential of technology to stimulate financial inclusion.”
Among other large economies, prospects are strongest in the Philippines, where growth is expected to accelerate to 6.4 percent this year, and Vietnam, where growth was dented by the severe drought, but will recover to 6.3 percent in 2017. In Indonesia, growth will increase steadily, from 4.8 percent in 2015 to 5.5 percent in 2018, the report says, contingent on a pickup in public investment and the success of efforts to improve the investment climate and increase revenues. In Malaysia, however, growth will fall, to 4.1 percent in 2017 from 5 percent last year, because of weak global demand for oil and manufactured exports.
Among the smaller economies, the growth outlook has deteriorated markedly in some commodity exporters. In Mongolia, the economy is projected to grow only 0.1 percent, down from 2.3 percent in 2015, on weakening min-eral exports and efforts to control debt. Papua New Guinea will see its economic growth at 2.2 percent in 2017, down from 6.8 percent in 2015, because of declining prices and output for copper and liquefied natural gas. By contrast, growth will remain buoyant in Cambodia, Laos PDR and Myanmar. As regards Pakistan, growth acceler-ated in FY16, driven by consumption while investment remained low. Exports continued to fall when soft global demand exacerbated the effects of Pakistan’s long-term decline in competitiveness. After achieving macroeco-nomic stability, the government continued to deliver on its structural reform agenda in FY16, but much remains to be done if growth is to be strengthened and sustained. Pakistan has important strategic endowments and develop-ment potential. The increasing proportion of Pakistan’s youth provides the country with a potential demographic dividend and a challenge to provide adequate services and employment. Pakistan continues its modest growth re-covery. Growth rate in 2017 is expected to rise to 4.8 percent the World Bank report says.
The writer is former Director General, (Emigration) & Consultant: I.L.O and I.O.M.