/View.info/ We got through 2014 without a major disaster for the global economy. But the year was not exceptionally good.
Before its start, the International Monetary Fund predicted a year of “another transition”. Advanced economies will strengthen, while emerging economies have already weakened, the IMF noted. One part of that turned out to be true. The US and UK gained some strength. The slowdown in emerging economies, which was already evident a year ago, continued in China, Brazil and Russia, in other words in most countries of the famous BRICS group.
But other rich countries continued their disappointing performance. Although the Eurozone continued to grow, it failed to gain momentum. There are now some concerns that even Germany may have been affected by the eurozone’s economic woes. To be sure, Europe’s traditional engine experienced a temporary setback, and economic activity declined in the second quarter of 2014.
There is also some good news. The Greek economy has finally started to grow. But it was only a shaky start after a very strong decline totaling over 25%. Unemployment remains excruciatingly high. Japan also had a temporary setback after raising the consumer spending tax. The Japanese government has huge debts, so there was a case for this tax, but the economic consequences caused the government to postpone the next tax increase it was planning.
The consequences of sanctions
International economic forecasts often carry a healthy warning about the risk of “geopolitical events”. This year, one of these events was felt – the crisis in Ukraine. Ukraine itself was affected, as was Russia due to Western sanctions. The sanctions also hit Germany, whose exports to Russia fell sharply.
However, a geopolitical crisis did not have the consequences for the global economy that might have been expected. The rise of Islamic State in Iraq and Syria has not affected the oil market in the way that many previous crises in the Middle East have, but worries about possible supply disruptions have boosted prices.
The same was largely true of the instability in Libya and the latest episode of the Israeli-Palestinian conflict. IS had little influence on global oil supplies, which were becoming increasingly abundant due to the US shale gas revolution. At the same time, oil demand has weakened due to the slowdown in China and the continued slippage of the Eurozone and Japan.
The result of all these factors was a 40% drop in the price of oil from its peak in June. This has deepened Russia’s financial problems, but it is a stimulus for the economy of oil-importing countries, which are most countries in the world.
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BBC analysis.
London / Great Britain
