“Recent developments reflect tentative signs of recovery in the global economy, with real growth in global output estimated at 4.8 per cent in 2010, in contrast with the 0.6 percent contraction recorded in 2009.”
This is according to Finance Minister Dr Ashni Singh who just prior to outlining his budget on Monday last, updated the House on the global developments which bore relevance on the crafting of this year’s budget
Dr Singh said that the expansion in the global economy resulted from a 2.7 percent growth in the advanced economies, driven by a strong rebound in some Asian economies.
He noted that the recovery in the United States is continuing but remains moderate, as a result of private consumption remaining subdued.
The Minister said that growth in the emerging and developing economies is estimated at 7.1 per cent, led by China and India with growth of 10.5 and 9.7 percent respectively. He said that growth in Brazil is estimated at 7.5 per cent, making it one of the fastest growing economies in the world in 2010.
“Consistent with a global recovery, world trade volumes are estimated to have grown by 11.4 per cent, reflecting a turnaround from the decline of 11 percent recorded in the previous year.”
He said that the global economic outlook remains uncertain for a number of reasons, “Principal amongst these is the tension between the case for expansionary policies to boost lagging demand and secure the recovery on the one hand and, on the other hand, the case for fiscal consolidation in the face of a severe debt crisis in many large and systemically important economies.”
The Minister said that, “This was perhaps most evident in the Euro area, which grew by an estimated 1.7 per cent in 2010, reflecting the effects of sovereign debt crisis in some member states, and resultant sharp adjustment measures, including withdrawal of previous stimulus interventions, cuts in government spending, and increases in taxes.”
The Euro, he said, depreciated by 7.8 per cent against the US Dollar in 2010, and given the potential for continued public debt problems and possible implications for economic growth, it is likely that the value of the Euro will continue to fluctuate in 2011, with attendant uncertainties for countries with trading ties and other interests in the European Union.
The Minister informed the House that developments in global commodity markets were reflective of the emergent recovery, with world market food, metal, and fuel commodity price indices rising by 26.8 per cent, 29.6 per cent, and 20.1 percent respectively, in 2010.
He pointed out that despite the steady upward price drift which is expected to continue, even if at a moderated pace, in the coming year, there was relative unevenness across commodities. Gold, he said, rose by 22.5 per cent to US$1,391 per ounce, aluminium rose by 8 per cent to US$2,357 per tonne, rice declined by 11.4 per cent to US$537 per tonne, sugar rose by 24.8 per cent to US$0.31 per pound, and wheat rose by 48.8 per cent to US$307 per tonne.
“On balance, the prospects for commodity producers appear positive, although the impact of rising oil prices is likely to dampen this outlook for the oil importers amongst them.”
Dr Singh said that, “against this background, global output is projected to increase by 4.2 per cent in 2011, underlying which is projected growth of 2.2 percent in the advanced economies, while emerging and developing economies are estimated to grow more rapidly at 6.4 per cent.” World trade volumes, according to the Finance Minister, are projected to continue to increase by 7 per cent. He did point out that significant downside risks remain, and much of the global recovery will depend on the balance achieved by advanced economies and large emerging economies between accelerating growth in the immediate term and achieving fiscal sustainability into the medium term.
Speaking on the region, Dr Singh said that the Caribbean economies are estimated to have recorded marginal growth of 0.5 per cent in 2010 and are projected to grow by 2.2 per cent this year.
He said that it reflects the slow pace of recovery in the tourism sector, with many destinations still to resume previous levels of activity, the fallout from the CLICO (Colonial Life Insurance Company) and Stanford debacles which are still to be resolved in most jurisdictions, continued difficulties faced by key industries such as bauxite and the international business sector, compounded by limited availability of fiscal space to accommodate counter cyclicality.
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