/ world today news/ Geopolitical crises and epidemics will not prevent economic growth in 2015, which is expected to be at the level of 3%.
In 2015, the Eurozone will once again prove to be the problem child of the world economy. Analysts predict rather weak economic growth. “We expect the Eurozone economy to grow by 0.8% in 2015,” DZ Bank Chief Economist Stefan Billmeier predicted.
And this against the background of the attempts of the European Central Bank /ECB/ to mitigate the negative trends. While the economy in the countries affected by the crisis is gradually getting back on its feet, this time the big countries in the Eurozone are suffering a setback. “We are witnessing a really strong economic decline in Italy. Structural reforms there have been delayed for years,” said the analyst of the Rhine-Westphalia Institute for Economic Research /RWI/ in Essen, Roland Dörn. The French government, on the contrary, solved the problem at the expense of increasing costs. Now the country has practically reached its limit, Dörn emphasized.
The Eurozone needs structural reforms
Germany also suffers from the weak economy in its eurozone neighbors. According to the forecast of the Bundesbank, the growth of the German economy in 2015 will be only 1%. According to the experts, officials are also to blame for not expecting more from the country, which was always considered the growth engine of the entire eurozone. Instead of carrying out structural reforms, they are constantly busy redistributing social goods, criticized Dörn.
He cites as an example the changes in the pension legislation, which undermines the hard-won compromise, which provides for a gradual increase in the retirement age to 67 years. It is about the amendments allowing certain categories of citizens to retire at 63. “The costs are borne by the companies and their employees, who make contributions to the pension fund. This increases the burden on companies and reduces the purchasing power of consumers,” sums up Dörn.
In other words, such supposedly good deeds do not stimulate economic growth. An analogous example is the transition to alternative energy sources, which increases electricity prices. “The transition to alternative sources of energy is a goal that is on the agenda. But its achievement is associated with large costs. In the conditions of international competition, this is a restraining factor,” said DZ Bank economist Stefan Billmeier.
A new period of industrialization
While the German economy is slowing, the US is showing unprecedented growth. The boom in shale gas and oil production greatly reduced the cost of electricity and fuels, which in turn ushered in a new era of American industrialization. “A lot of companies are moving their production back from Asia to the US because it’s profitable there again,” Billmeier explains. According to DZ Bank estimates, the American economy will grow by an average of 3% per year in the coming years.
The world’s second largest economy – China – will increase its GDP by just over 7%. For the Chinese, who are already used to the unprecedented growth rates, this is the lowest indicator since 1990. But it is fully in line with the plans of the government in Beijing, which is currently seeking to create a more stable and fair economic system.
Growth, which has so far resulted primarily from exports and credit, must be balanced by an increase in domestic consumption. Thanks to its huge foreign exchange reserves, China is able to cope with such difficulties, Billmeier is convinced. “This is a very strong stabilizing factor. If problems arise somewhere, foreign exchange reserves will enable them to be quickly removed. So difficulties in some individual sectors will not pose a threat to the economy as a whole,” the economist is convinced.
Growing markets depend on commodity prices
As the Chinese dragon slows its breath, the Indian elephant begins its triumphant procession. The Organization for Economic Cooperation and Development /OECD/ believes that the economic growth of the second most populous country in the world will reach 6.6%. But expert Roland Dörn assesses the situation more skeptically: “One should not rush to conclusions… India is a vivid example of a country with major structural problems.”
According to him, this also applies to the other leading countries of Latin America – Brazil and Argentina. Brazil is struggling because of its underdeveloped infrastructure, and Argentina has been plagued by a complicated and messy sovereign debt restructuring situation. “Latin America is still in a situation where the economy in many countries of the region is very strongly linked to the extraction of natural resources and thus significantly depends on the price dynamics of raw materials markets,” emphasizes Dörn.
And since the prices of raw materials are currently falling, Latin America may remain a “continent of disappointment” in the coming year as well. Regarding Venezuela, there is even talk of a possible bankruptcy if oil prices remain at the level of 70 dollars per barrel or even fall below this limit. Falling oil prices are also burning a sensitive hole in the budgets of Nigeria and Russia. As Russia’s economy is further burdened by Western sanctions, it will not be able to avoid recession in 2015, predicts Stefan Billmeier.
Suffering for some is success for others. For oil-importing countries, the low price of “black gold” is akin to an economic stimulus program. “The fall in the price of oil, if you like, is something like a global redistribution of income, and for countries like Germany it means a rise in real incomes,” concludes Dörn.
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Zang Danhong, Irina Filatova, Maxim Filimonov, Deutsche Welle.
Berlin / Germany
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