Global Economic Trend in 2013......

We must have heard many time as world is flat, and whole world is global village and one country is connected by other. And even a small change in one economy is going to have effects on whole world.

When recession started in 2008. Most of the economist predicted that it is just going to have effect in short run. Some predicted that this recession is going to have V shape. Means after some time economy is going to bounce back and will return to normal growth.

But some of the pessimist compered this crisis with great recession of 1930. And they predicted that this is going to have W shape. Means after downturn it will grow up for short period and again it will come down and then again it will grow back.

    As per my understanding those who predicted W shape were correct partly because of the crisis in Eurozone and and partly because of slow-down in Emerging Market.

Still recession is not over and it is going to be in next few year at least in 2013 it is not going to change.

to prove my view, I am going to explain condition of world economy in brief.

Starting from Europe. Still there is one trillion question that formation of Eurozone was ban or boon for its member countries and other parts of the world.

In Europe, the tail risk of a eurozone break-up and a loss of market access by Spain and Italy were reduced by last summer's decision by the European Central Bank to backstop sovereign debt. But the monetary union's fundamental problems – low potential growth, ongoing recession, loss of competitiveness, and large stocks of private and public debt – have not been resolved.

Moreover, the grand bargain between the eurozone core and, the ECB,  – painful austerity and reforms in exchange for large-scale financial support – is now breaking down, as austerity fatigue in the eurozone periphery runs up against bailout fatigue in core countries like Germany and the Netherlands.

Meanwhile, Germany's insistence on imposing losses on bank creditors in Cyprus is the latest symptom of bailout effect in the core. Other core eurozone members, eager to limit the risks to their taxpayers, have similarly signaled that creditor "bail-ins" are the way of the future.

Outside the eurozone, even the United Kingdom is struggling to restore growth, due to the damage caused by front-loaded fiscal-consolidation efforts, while anti-austerity sentiment is also mounting in Bulgaria, Romania, and Hungary.

In China, the leadership transition has occurred smoothly. But the country's economic model remains, as former Premier Wen Jiabao famously put it, "unstable, unbalanced, uncoordinated, and unsustainable."

China's problems are many: regional imbalances between its coastal regions and the interior, and between urban and rural areas; too much savings and fixed investment, and too little private consumption; growing income and wealth inequality; and massive environmental degradation, with air, water, and soil pollution public health and food safety. China is no longer haven for manufacturing sector. China is expecting dis investment in manufacturing sector.

The country's new leaders speak earnestly of deepening reforms and rebalancing the economy, but they remain cautious.. Moreover, the power of vested interests that oppose reform – state-owned enterprises, provincial governments, and the military, for example – has yet to be broken. As a result, the reforms needed to rebalance the economy.In 2013 we can see some new policy in china to exhilarate the growth.

But as you now all the policy takes its own time to show the real effect. So next few year china will grow as fast as it used to grow.

Coming to Indian Economy. It is also struggling to  restore growth. Indian economy is lacking bold decision from the government. Current account deficit is still high and it will take at least 2 years to bring down to desired level.

In India will again see dance of democracy in 2014, where we are expecting change in government. And it is irony of fate that in India if government changes, whole reform and policy changes, because of politics.

As per Indian leaders trend, they give less importance to development. Their man focus are to change or amend the policy of previous government to satisfy ego of party. As per the BBC news after so many scam in all most all the sector, FDI flow in Indian Economy is going to be affected. It will take so much time and effort to improve the image and satisfy FDI.

As per the Bloomberg news.

In China – and in Russia (and partly in Brazil and India) – state capitalism has become more entrenched, which does not bode well for growth. Overall, these four countries (the BRICs) have been over-hyped, and other emerging economies may do better in the next decade: Malaysia, the Philippines, and Indonesia in Asia; Chile, Colombia, and Peru in Latin America; and Kazakhstan, Azerbaijan, and Poland in Eastern Europe and Central Asia. 

Now let check health of Japan.

 

Oh my God condition of Japan is also not good. Japan is trying a new economic experiment to stop deflation, boost economic growth, and restore business and consumer confidence. It has several components: aggressive monetary stimulus by the Bank of Japan; a fiscal stimulus this year to jump start demand, followed by fiscal austerity in 2014 to rein in deficits and debt; a push to increase nominal wages to boost domestic demand; structural reforms to deregulate the economy; and new free-trade agreements – starting with the Trans-Pacific Partnership – to boost trade and productivity.

But the challenges are many. It is not clear if deflation can be beaten with monetary policy; excessive fiscal stimulus and deferred austerity may make the debt unsustainable. And we should also not forget, tensions with China over territorial claims in the East China Sea may adversely affect trade and foreign direct investment for both countries.

Then there is the Middle East, which remains an arc of instability from the Maghreb to Pakistan. Turkey – with a young population, high potential growth, and a dynamic private sector – seeks to become a major regional power. But Turkey faces many challenges of its own. Its bid to join the European Union is currently stalled, while the Eurozone recession dampens its growth. Its current-account deficit remains large, and monetary policy has been confusing, as the objective of boosting competitiveness and growth clashes with the need to control inflation and avoid excessive credit expansion.

Moreover, while rapprochement with Israel has become more likely, Turkey faces severe tensions with Syria and Iran, and its Islamist ruling party must still prove that it can coexist with the country's secular political tradition.

Now coming to the American economy. 

In this current global environment, has America become a ray of hope? The US is experiencing several positive economic trends: housing is recovering; shale gas and oil will reduce energy costs and boost competitiveness; job creation is improving; rising labor costs in Asia and the advent of robotics and automation are underpinning a manufacturing resurgence; and aggressive quantitative easing is helping both the real economy and financial markets. As per the recent data from Bloomberg unemployment rate has been decreasing constantly. And mortgage business has started growing and growth rate in real state and Mortgage business is expected to increase in coming days. 

Investment in Manufacturing sector has increased. And Industrial growth rate is positive in last quarter. American government is expecting more investment in Manufacturing sector.

But risks remains. Unemployment and household debt remain stubbornly high. The fiscal drag from rising taxes and spending cuts will hit growth, and the political system is dysfunctional, with partisan polarisation impeding compromise on the fiscal deficit, immigration, energy policy, and other key issues that influence potential growth.

In sum, among advanced economies, the US is in the best relative shape, followed by Japan, where policy is boosting confidence. The eurozone and the UK remain in recessions made worse by tight monetary and fiscal policies. Among emerging economies, China could face a hard landing by late 2014 if critical structural reforms are postponed, In India growth rate will depend on will power of current government and next government. and the other BRICs need to turn away from state capitalism. While other emerging markets in Asia and Latin America are showing more growth than the BRICs, but size of other emerging economy is not too big to change the direction of world.

At the end 2013 is going to be similar like 2012 and we should wait and watch situation and economic drama of world. We should play our role in this drama carefully.

Thanks