HSBC has put the dampers on world economic growth, or rather revealed that it is not as might have been suggested in previous forecasts. The entire world, including Emerging Markets, will see a drop in their predicted economic growth this year and next year.
Fears over tapering of the Federal Reserve’s Quantitative easing will problem heighten that slowdown in economic growth in the coming years also. China has had its growth prospects cut from 8.2% to 7.4% this year. Next year, they will also be at 7.4% (down from the higher 8.4%). India has been slowing down on reforms in the country and future bills may cause some concern over competitiveness on the global scene.
This is particularly true if the Land Acquisition Bill gets voted through parliament this August, leading to speculative increases in land prices and increased farm and agricultural produce there, making it harder to export.
Economic growth around the world will stand at 2% (which is a drop from previous estimates of 2.2%).
Quantitative Easing being withdrawn may bring about a further reduction in estimates for global growth in coming months. The result will be a vicious circle, with the emerging markets slowing down in terms of growth, followed by quantitative easing being removed because of slight gains in the US economy. However, the reduction in EM growth will bring down the US ultimately and some might suggest it would bring about a reintroduction of QE.
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