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Global economic growth tipped to slow down

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Global economic growth tipped to slow down

The rate of growth in the global economy is likely to decline this year, new estimates suggest.

According to the National Institute of Economic and Social Research (NIESR), emerging markets such as India and China had been bolstering international demand over the last few years - and therefore supporting growth figures for the whole world.

However, financial problems are starting to become apparent in some of these nations, which means the same level of support can no longer be expected this year.

As a result, the overall rate of growth in the global economy looks set to weaken, with output expected to go up by just 3.3 per cent throughout 2012.

NIESR said this demonstrates that every major economic region on Earth is seeing a slowdown in growth for the first time.

"Fiscal austerity is the new conventional wisdom in many countries, even where unemployment is unthinkably and tragically high," the organisation commented.

"In countries without fixed exchange rates government bond yields are close to zero, suggesting a remarkably low cost funding environment for necessary long-term investment."

NIESR said that if a "conducive environment for the necessary debt reduction" is to be created, faster nominal economic growth must be seen around the world.

The organisation added that much of the world's economic difficulties appear to be stemming from Europe, which was described as the "epicentre of the debt crisis".

This, it said, means that policymakers in the continent must decide whether to integrate eurozone members more closely or accept that a country might pull out of the currency and trigger a financial contagion.

NIESR stated that in the next year, countries in Europe are likely to experience "remarkably divergent growth paths".

For instance, it said the south of Europe is in a state of deep recession while Germany is enjoying relatively strong growth, which could potentially fuel tensions in the continent over the coming months.

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