There are storm clouds gathering on the horizon that may very well lead to turbulence and rough sailing for world economy. And as leading economists, thinkers, analysts and business leaders gather later this week in Davos, Switzerland, for the annual World Economic Forum, they will have plenty to focus on as they ponder just how well the global economy will do from the buffeting of a near perfect storm.
National economies have little room to manoeuvre as a result of enduring the long-term effects of the 2009 fiscal crisis. Balance sheets are bleeding red ink and austerity programmes have left voters cranky with little room for compromise. The fall in oil prices over the past six months too has meant that currencies linked to nations that are reliant on oil revenues — Canada is a prime example — have plummeted. The drop in oil revenues has shaved 5 cents off the Canadian dollar compared to its US counterpart.
Economic output and factory production levels have declined in China — it could not reasonably be expected to continue its rate of growth of annual GDP close to double figures in the longer term.
Germany too is spluttering while across the European Union — with the exception of a resurgent UK — the growth outlook is poor.
Put all of the factors together and the indications are that a slowdown is coming. Swift action now, and flexible policies, will at least lessen its impact.
