Mary’s Top 8 Global Economic Forecasts for 2013

Mary O'Hara-Devereaux | | Future Trends

The Global Economy Will Be Anemic But Stable in 2013.

The global economy, slowing since 2010, accelerated its downturn in 2012 with the Eurozone dropping into a recession and China, India & Brazil slowing. 2013 looks better for all but the Eurozone. Look for overall global economic growth to hover around 2.5% annual growth unless some unforeseen crisis unfolds.

    1. The U.S Economy chugs ahead despite strong headwinds domestically and globally.

    The underpinnings of the U.S. economy will slowly get better but growth will remain anemic.

    After a strong start it will slow under the weight of government fiscal policy and sequester spending cuts that will take around 1.8% off GDP in 2013. However the engine will fire on all cylinders but not rev up much more than to 2.5% annual growth by the end of the year.

    2. China regains momentum; Japan improves ever so slightly.

    Buoyed up by the effects of last years stimulus package and stronger consumer spending China’s economy will perform at about 8.2% up from a 13 year low of 7.8% in 2012. Despite the downside risks of the anemic global economy and domestic inflationary pressures, China will gain from increased growth in Asia. Chinese Government policies to reduce environmental pressures and narrow income gaps will restrain growth of previous years. Japan returns to very low growth of about 1.0%.

    3. Eurozone contracts again in 2013.

    The economies of southern Europe will stagnate in a rather deep recession with very high unemployment rates, especially among younger people. Northern economies such as Germany, Belgium, France and the Netherlands will have weak to flat growth. Expect a -0.03% drop. The Central Bank will defend the Euro preventing further forecasts of a breakup. High unemployment at over 12% and tight lending conditions are major constraints.

    4. Emerging markets especially in Asia remain the engine of growth.

    India slowed in 2012 but is poised for more growth in 2013 due to increased external demand and pro-growth policies. Brazil returns to 3% growth and the Asian economies of Indonesia, Malaysia, the Philippines, Thailand and Vietnam will continue steady growth around 6%. With inflation controlled and commodity prices down conditions are favorable for the emerging markets to continue as the engine of growth.

    5. Latin America & Mexico continue to be bright spots.

    Although the southern regions of the Americas have many challenges to overcome, it is a highly urbanized region, which accounts for much of the economic growth now and in the future. The region should grow between 3.5 – 4%, up from 3.1 last year. Fueled by China’s recovery as their leading trading partner and better internal policies Brazil regains momentum and will be complemented with increased growth in Chile, Columbia and Peru. Mexico will continue its growth rate of around 3.5 – 4% over the last 2 years. If the economic reforms that are proposed take effect Mexico could continue growth for years to come.

    6. Inflation will likely drift down in 2013.

    The anemic growth and high unemployment around much of the world are keeping price pressures down. The fall of commodity prices will help to keep inflation low. It is likely that many countries from the U.S to the Eurozone to China and other emerging economies will keep monetary policies accommodative.

    7. The dollar will gain modest strength and remain the global safe haven.

    With the Eurozone in recession and the U.S. economy gaining some momentum with modestly optimistic prospects, the U.S. looks like a safe bet for the short-term future. It is likely that the rival currencies, the Euro, the Yen and the British Pound will be weakened by those governments needing to engage in easing that will weaken them over the course of 2013.

    8. Unemployment will continue as the global plague.

    The anemic economy prolongs a long-term trend to high unemployment rates around much of the world. The U.S. will remain around 7.5%; European unemployment is at an all time high at over 12%. In China distribution of jobs is very uneven and the income gap is growing. Particularly challenging are employment opportunities for the young workers in countries with large and growing populations in most of the emerging and developing economies. The creation of new jobs in sufficient numbers may be the most defining issue of this century.

Wild Cards

Although the risks to the global economy seem to be diminished there is a fragility and unevenness to the recovery. There are any number of low probability wild cards that if they did happen could disrupt the upward trends:

  • Eurozone meltdown.
  • North Korea launches a missile with a nuclear warhead at South Korea or Japan.
  • The Middle East erupts into a widespread war zone involving Israel and the West.
  • Global epidemic shuts down travel and drives global growth below 2%.
Mary O'Hara-Devereaux

Mary O'Hara-Devereaux

Mary O’Hara-Devereaux, Ph.D, Founder and CEO of Global Foresight, is one of the world’s leading futurists and business forecasters. She has over 25 years of experience advising senior policy makers, Fortune 500 executives, and Blue Chip clients. Mary is a leading expert in future trends, the future of work, and the future of China.
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