Bleak Economic Outlook

Bleak Economic Outlook

By Dr Arvind Kumar

Preliminary indications present a dismal outlook for global economy in 2011. The US and UK are likely to withdraw their stimulus packages because of increasing inflation and debt in the wake of persisting pressure on wages. The stimulus withdrawal entails the possibility of exerting more downward pressure on wages. Even adoption of protectionist policies by these countries may not provide much relief owing to their dependence on imports of textiles, oil, food and minerals from developing countries. In the wake of these developments, the possibility of these countries being pushed to deeper crisis cannot be ruled out, especially when the process of stimulus withdrawal begins. A decline in wages of the workers in consonance with international pressures has been facilitated by the United States as well as United Kingdom. On the other hand, Europe is seemingly hard pressed. The economic crises obtaining in Greece, Ireland and Portugal have adversely impacted the overall economy of EU. The possibility of seeping of this impact into the major European economies – Germany and France – cannot be ruled out. This will put the very existence of the European Union at stake as countries clamour to find and implement different solutions to their predicament. It must be repeated that this scenario may unfold in 2012, not in 2011.

Burgeoning economies of China, India, Brazil, South Africa, South Korea and others will be, relatively speaking, better. The outlook for the developed countries seems negative for 2011 while that for the developing countries is positive.