Commentary

‘Stall speed’ syndrome in global economies

‘Stall speed’ syndrome in global economies
A woman begging for money in Malaga, Spain. Recession in Europe, which was once concentrated in peripheral economies, such as Spain, has now spread to the core economies of Germany and Italy. PHOTO: REUTERS
Published: 4:04 AM, September 18, 2014
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Relapse is the rule in the post-crisis global economy. In the United States, Japan and Europe, gross domestic product growth faltered again in the first half of this year.

These setbacks are hardly a coincidence. Persistent sluggish growth throughout the developed world has left major economies unusually vulnerable to the inevitable bumps in the road.

Sure, there are excuses — there always are. A contraction in the US economy in the first quarter of the year was dismissed as weather-related. Japan’s plunge in the second quarter was blamed on a sales-tax hike.

Europe’s stagnant growth in the second quarter has been explained away as an aberration reflecting the confluence of weather effects and sanctions imposed on Russia.

WHAT AILS THE GLOBAL ECONOMY?

As tempting as it may be to attribute these developments to idiosyncratic factors, the latest slowdown in developed countries is not so easily dismissed.

Lacking cyclical vigour in the aftermath of severe recessions, today’s economies are finding it especially difficult to shrug off the impact of shocks and break out of anaemic growth trajectories.

Consider the US. Though annual GDP growth is estimated to have rebounded to 4 per cent in the second quarter of this year, following the 2.1 per cent first-quarter contraction, that still leaves average growth in the first half of the year at a measly 1 per cent.

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