The European debt crisis that has pushed Greece to the brink of default still has a way to go before being resolved. U.S. economic indicators including weak private consumption are fueling concerns of a double-dip recession. Emerging economies that have spearheaded a global recovery since the 2008 financial crisis are now tightening their monetary policies to rein in inflation.
Three years after the global financial crisis, the world economy has hit another stumbling block.Just earlier this year, economists and analysts seemed ready to paint rosy pictures of the economy, setting the celebratory mood for surviving what was often dubbed the worst financial crisis since the Great Depression. So what went wrong? And where are we heading to?
The fresh 2012 global economic outlook released last month by our think tank, Samsung Economic Research Institute (SERI), may help us see through the lingering economic uncertainties and financial market volatility.
According to the report, the latest crisis boils down to the side effects of the economic stimulus packages. What was initially a financial crisis has now evolved into a fiscal crisis engulfing several countries, threatening to eat away the world economy’s fuel for growth for a prolonged period.
SERI forecasts the global economic growth to slow to 3.5 percent in 2012 from an estimated 3.8 percent in 2011, marking a second straight year of slowdown.
The massive fiscal spending, which has helped major economies around the globe avert the worst of the 2008 financial crisis, has begun to take its toll in the second half of 2011.
Under mounting fiscal debt, developed countries have exhausted measures to boost their economies when they are still strained with weak consumption. With the private sector having yet to regain its resilience, economic growth is most likely to be hobbled next year, according to SERI.
Slower growth in developed countries, in turn, spells into that much less demand for goods made in emerging nations. Emerging economies are also grappled with rising inflationary pressure, partly caused by massive liquidity injected by developed countries.
In the face of lower export growth and higher prices, emerging nations may risk a contraction in their economies.
Against this backdrop, the Korean economy is forecast to post a 3.6 percent expansion next year, down from an estimated 4 percent in 2011, as its three pillars for growth – exports, domestic demand and government stimulus – are all likely to lose momentum.
So, we are faced with yet another time of uncertainties. While it’s crucial to be prepared for the worst, we shouldn’t let the gloomy prospects discourage us. After all, one of many lessons history teaches us is that opportunities do present themselves even during crisis.
(You can find SERI’s 2012 outlook summary report in English here.)
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About Samsung Economic Research Institute (SERI):
SERI's goal is to become a cornerstone of today's knowledge society through groundbreaking, open and field-based research that contributes to the community.
At SERI, researchers and support staff strive daily to interpret the myriad of factors and events in this fluid global environment as well as domestic developments. Our research ranges from macroeconomic trends, industries and public policy to security concerns on the Korean peninsula.