The U.S. in the brightest spot in the world economy, as another global recession
threatens, according to the latest Brookings Institution-Financial Times tracking
index.
Tiger (Tracking Indices for the Global Economic Recovery) shows the world's
recovery to be "on the ropes" despite the best efforts of the world's central banks
to boost demand.
Economic data and confidence indicators have deteriorated since earlier in the year
across the Group of 20 leading developed and emerging economies, apart from the US,
which is on the brink of the presidential election.
The financial markets have remained relatively strong with the financial component of
the index recording its strongest position since June 2011. The Tiger Index findings
cast a shadow over this week's meetings of the International Monetary Fund and
World Bank in Tokyo as the world's finance ministers and central bankers struggle
to find ways to generate self-sustaining growth.
The deterioration in hard data and sentiment has forced economic forecasters to lower
their estimates of growth this year and next. A leak of the detailed IMF forecasts, to be
published on Tuesday, showed the fund revising down its 2012 global growth forecast to
3.3% from 3.4% in July and shaving another 0.3% points off its July forecast of 3.9%
for 2013.
Professpr Eswar Prasad of the Brookings Institution, said "The global economic
recovery is on the ropes, battered by political conflicts withing and across countries,
lack of decisive policy actions and governments' inability to tackle deep-seated problems
such as unsustainable public finances that are stifling growth."
The Tiger Index shows momentum in the global economy dissipating despite action by
the Federal Reserve, European Central Bank, Bank of Japan and the Bank of England
to boost the recovery. Only in the U.S. has economic momentum remained reasonably
robust, while it has slackened off in the formerly strong eocnomies such as the BRICs
(Brazil, Russia, India and China).
The Tiger Index combines measures of real economic activity, financial variables and
indicators of confidence, according to the degree to which they are all moving up or
down at the same time. Using sophisticated statistical methods it can capture the
co-movements of data which are measured on a very different basis and across
many countries.
In this release of the index, the Brookings Institution produced a separate indicator
for the troubled peripheral European economies of Portugal, Italy, Ireland, Greece
and Spain. Only Ireland, these five countries, has avoided a sharp descent towards
the levels last seen during the financial and economic crisis of 2008-09.
Professor Prasad said that fiscal policy the structural reforms were hamstrung in most
economics, leaving the burden on central banks to revive the flagging recovery.
"In the absence of a broader range of decisive policy measures - including fiscal,
financial systems and structural reforms needed in many countries - the world
economy may soon be down for the count."
Sheila McKinney
