While the European debt crisis will slow global economic growth this year and next, developing nations will have the tough task of taking up some of that slack, according to the Conference Board of Canada.
In a report Monday, the Ottawa-based think-tank also said a stumbling recovery in the United States and weakened domestic demand will limit Canada’s growth as well.
The good news for the global economy — and for Canada — is that “we don’t expect the U.S. economy to slip back into recession this year,” the report said.
The Conference Board, in its World Outlook Summer 2012, said the global economy will manage just 2.6% growth this year and 3% in 2013.
The 17-nation euro-zone, meanwhile, will contract by 0.4% this year and manage only meagre growth of 0.7% in 2013, the board said.
The U.S will expand 2.3% this year and 2.7% in 2013 — "assuming the euro-zone doesn’t implode, the Chinese economy avoids a crash, and the Obama administration and Congress relieve some of the uncertainty over the country’s fiscal health."
The board said Canada will be held back by the slow U.S. recovery and declining demand in this country. Growth is pegged 2.2% in 2012 and 2.4% next year.
"The three power blocks in the world economy, Europe, Japan and the United States . . . if not in a recession then, boy, their growth is uncomfortably low," Kip Beckman, principal economist at the Conference Board, said in an interview.
China and India — and the Asia-Pacific region in general — "at least have some room to maneuver," he said.
"China has some room to stimulate the economy and so does India to a lesser extent. That’s going to have to continue."
Last week, the Bank of Canada lowered its forecasts for this country to growth of 2.1% this year and 2.3% in 2013.
As for the global economy, the central bank forecast expansion of 3.1% in both 2012 and next year. Its reading on the U.S. economy is for 1.9% growth this year and 2.1% in 2013.
Many Latin American countries — which rely on export demand from the developed world — will also see slower growth, the report said.
"At present, demand from Asia is supporting growth in this region but tumbling commodity prices, especially for oil, and political uncertainty in Venezuela and Argentina could drag down growth even further over the near term."
The situation in Greece, meanwhile, became more clouded after a report on Sunday by German newspaper Der Spiegel held out the possibility that the International Monetary Fund may stop providing funding to the critically indebted country.
That prompted an unusual response Monday from the IMF, in which it said it "is supporting Greece in overcoming its economic difficulties."
"An IMF mission will start discussions with the country’s authorities on July 24 on how to bring Greece’s economic program, which is supported by IMF financial assistance, back on track."
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