THE GLOBAL RECOVERY IS CONSOLIDATING
Following the exit from the worst recession in post-war history, global economic growth accelerated in 2010. World GDP grew by 5.8% after contracting by 0.4% in the previous year, as expansionary fiscal and monetary policies, and a revival of consumer and business confidence, stimulated aggregate demand in the early part of the year. Nevertheless, the solid overall performance in 2010 masked a divergence in regional growth patterns, with the G3 economies expanding by 2.6% and Asia ex-Japan at a much faster 8.1%.
The sharp rebound in Asia ex Japan was underpinned by strong household and corporate balance sheets, which boosted domestic demand. The cyclical upswing in the global electronics industry and the exceptional pump-priming measures adopted by China further supported economic activity in the region and expedited the recovery from the recession. In contrast, the Greek sovereign debt crisis in May and concomitant fiscal consolidation dampened economic momentum in the Eurozone, whilst GDP growth in the US faltered in the middle of the year as the inventory restocking cycle came to an end.
Towards the end of last year, the global economy picked up again owing to firmer private demand, notwithstanding a gradual withdrawal of the stimulus from government spending. Even so, the attendant rise in oil prices, aggravated by the unrest in the Middle East/North Africa (MENA) region since February 2011 and the Japanese earthquake in March, introduced new uncertainties to the economic outlook.
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