Whether it is the crude Price, commodity prices, unemployment figures or equity stock markets, there are sufficient economic indicators that suggest an underlying anxiety regarding the global economic health. Why is it so?
Even three years after it was faced with a crisis, the global economy remains enveloped in uncertainty regarding the future prospects. This is primarily due to three reasons.
Approaching the end of expansionary cycle
First, the cycle of fiscal and monetary expansions are finally reaching a dead end. The fiscal deficits are no more welcome, and the general consensus around the globe is that they are not required anymore. Theopinion that the supposed QE3 in United States may end up doing more harm than good, is perfectly acceptable, for the simple reason, that economies of the world cannot keep running on borrowed time. Unless you allow the patient to finally stand up on his feet, it is difficult to know if she is cured. Same is true of economies. However, till the time, these economies begin to survive and grow without external stimuli, there would remain a certain degree of uncertainty and anxiety about the future.
Second reason for the anxiety is relatively weak pockets in Europe where there are significant problems. Countries like Greece, Portugal and Spain are still not free of all economic worries and any bad news regarding these economies keep sending chills down the spine of investors and businesses around the globe.
Inflation Worries and Monetary Tightening in Asia
The third and the last reason for the global economic concerns are related to rising inflation around the globe. This has been particularly bad in emerging markets like China and India, which have now begun to matter in World economic growth projections. The recent damage in Japan and resultant slow down there is likely to add to problems of growth in Asia. As many Central Banks respond to rising inflation by reversing monetary expansions, investors and consumers will cautiously await the outcome of those measures, before they accept that everything is fine now.