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What lies in store in 2013?
Wed, 15 Jun Pre-Open

2013 may not be a year that the global economy would want to look forward to. This is because, according to Nouriel Roubini, fiscal woes in the US, debt problems in Europe, stagnation in Japan and slowdown in China could all converge in that year and stifle global growth.

Take the US for instance. The debt of this country has already ballooned so much that the government has not much headroom to spend more. For this, it is looking to raise the debt ceiling. But is facing resistance from the Republicans who want the government to come out with a debt reduction plan first. Besides these fiscal problems, the US has also to deal with rising unemployment. Unemployment rate has simply refused to come down. That is why the quantitative easing programs have not really worked as Americans are not willing to loosen their purse strings when the job market is in such a bad shape.

The debt problems in Europe have also accelerated and Greece has received a credit rating which is now the lowest in the world. Another bailout will only prolong the pain. Austerity measures seem to be the most sensible way out now but that only means that there will be more subdued growth seen in EU for a while.

As if the lost decade was not enough, Japan had to incur the wrath of nature recently. Indeed, fate has never been as cruel as it has for Japan which has also to deal with the recession caused by the global financial crisis. The destruction caused by the earthquake and the tsunami and the nuclear disaster has been a big blow to the prospect of a Japanese recovery. Although there could be a spurt in growth as reconstruction takes place, the real test for Japan will be the direction in which its economy moves once this rebuilding phase is over.

China, meanwhile, is dealing with inflation, which has propelled the central bank there to raise rates. This will dampen growth somewhat and maintaining growth while curbing price rises will be a huge challenge for the dragon nation.

According to Roubini, there is one-in-three chance that these factors will combine to thwart growth in 2013. Whether this happens or not remains to be seen but it is becoming increasingly obvious that recovery if any for the global economy is a long way off.

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