The global economy may be entering a new phase as the year draws to a close. New data suggest some of the uncertainty that has characterized much of 2013 appears to be lifting as a new year begins, though economists are cautious. Despite steady improvement, U.S. unemployment remains high, Europe’s debt crisis is far from over, and China’s economy continues to slow.
As the year ends, more people are finding work in the United States, the economy is growing at the fastest pace in two years and Congress has a new budget that effectively removes the threat of another costly government shutdown.
Barring another political standoff, small business advocate John Arensmeyer sees an improved business climate in 2014. “Could be a better year than 2013, particularly if we don’t see the type of shenanigans we saw with the shutdown.”
Across the Pacific, China's economy has slowed after decades of double-digit expansion.
But even with a relatively modest outlook of seven percent growth, international economist Uri Dadush said China continues to exert strong economic influence in the region.
“It’s going to be somewhat slower going forward over the next year or two, but still sufficient to pull a large number of countries along,” said Dadush.
But while improving demand is likely to benefit countries from Cambodia to Japan, European economies remain weak.
The European Commission says growth will slow in the 18 nations that use the euro - with unemployment likely to inch higher in the new year.
Despite recent banking reforms, Dadush said tough austerity measures in countries that received bailouts continue to weigh on Europe’s economy.
“Italy’s in deep trouble, and it’s going to take some years even for the Spains and the Portugals and the Irish to come out of the mess,” said Dadush.
Lingering questions also remain about the international impact of the U.S. central bank’s decision to scale back monetary stimulus. With prices of raw materials likely to fall next year, economists say commodity-dependent countries could see their revenues fall.
“That includes Brazil, but it also includes Turkey, it includes Hungary, it may include Indonesia, that is also commodity-dependent by the way,” said Dadush.
In the Middle East, some of the Arab Spring countries, which remain politically unstable, are expected to experience economic difficulties in 2014.
Pinfan Hong, chief of global economic monitoring at the United Nations, said, “Nevertheless, we believe some improvements are building the momentum for next year. So we expect the world economy to grow by about three percent for 2014.”
2014 also bodes well for Africa. After expanding at an annual pace of 4.8 percent in 2013, the African Development Bank projects growth to accelerate to 5.3 percent, bolstered by strong growth in the service sector and increased agricultural and mining activity.