Echo

A snapshot of the global slowdown

Monday, September 1, 2008

The most current data show that growth rates across the globe are decelerating. A snapshot of 34 economies illustrates this point.

The chart illustrates the change in growth rates for economies across several regions from Q4 2007 to Q1 2008 (click on the chart to enlarge). According to the data:
- Average annual growth rate in Q4 2007: 4.78%
- Average annual growth rate in Q1 2008: 3.88%
- Global slowdown: -0.90%

And for Q1 2008 to Q2 2008 (click on the chart to enlarge):
- Average annual growth rate in Q1 2008: 3.88%
- Average annual growth rate in Q2 2008: 3.21%
- Global slowdown: -0.67%

The number of countries whose growth rates rose (10 in Q1 and 7 in Q2) is small compared to the number of countries whose growth rates fell (24 in Q1 and 27 in Q2). Across 34 economies, only Poland and Indonesia posted accelerated growth rates in both Q1 and Q2. Hong Kong, Thailand, Indonesia, South Korea, and Singapore improved in Q1, while of those same five Southeast Asian economies, only Indonesia was able to hold in Q2. Southeast Asia is slowing and still “coupled” to the US, whose import demand has slowed substantially through Q2. Interestingly, the Scandinavian countries (Finland Q2 data is not available yet) improved slightly in Q2.

The snapshot shows a global slowdown in progress, either stemming from financial capital flows and/or through reduced export demand. The financial turmoil initiated in the United States has plagued the globe, causing at least $500-$600 billion in losses to date. With roughly $167 trillion at stake, McKinsey Instisute's estimate on the size of 2006 world capital markets, the ongoing health of the global macroeconomy is underscored by a recovery in the global financial system.

On the brighter side, on average the slowdown in Q1 (-0.9%) was more severe than the slowdown in Q2 (-0.67%). Evidence across this subset of the global economy suggests that the world may be pulling itself out of a macroeconomic rut. What do you think?

Please leave comments! Best, Rebecca Wilder

2 comments:

Janie September 1, 2008 at 11:15 AM  

It was interesting to see the growth change swing so widely in Singapore and Venezuela, plus to minus. Caution is certainly the rule of the day on an international as well as domestic basis. With gustav coming on shore as I write, we will maybe have something else with which to deal.

Rebecca Wilder September 1, 2008 at 12:51 PM  

You are right - Singapore slowed substantially in Q2; its growth patterns are quite cyclical, subject to changes in exports. It is unlikely that Singapore's growth rate will not slow much further - it has a strong fiscal sector and production fundamentals.

Venezuela is raking in the Petrodollars; like other oil-exporting economies, its domestic demand growth is very strong. However, unlike Singapore, its inflation rate is troublesome.

Thanks for the comment! R

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