Europe's woes take bite out of world economic growth

www.conferenceboard.ca

OTTAWA, April 26, 2012 /CNW/ - Economic turmoil in Europe will restrain global growth to just 2.6 per cent this year, which is even more tepid than the 2.9 per cent gain in 2011, according to the Conference Board's World Outlook Spring 2012.

"While many developed countries are struggling, countries such as India and China support growth in the global economy. But weaker export demand from developed markets raises some concern that emerging economies cannot maintain the same pace of growth in 2012," said Kip Beckman, Principal Economist.

China's real GDP growth is expected to slow from more than nine per cent in 2011 to the range of seven-to-eight-per-cent range in 2012, which represents a major downside risk for the world economy. China recently recorded its first trade deficit since 1989 as export growth slumped in large part because of the recessionary conditions in the European Union.

Austerity measures implemented by weaker European Union countries have taken their toll on the entire eurozone region. Real GDP will contract by 0.4 per cent this year and growth of less than one per cent is anticipated in 2013. Even the powerful German economy is not immune - its growth is forecast to slip to 0.6 per cent this year because of its trade linkages with other countries in the region.

Both the U.S. and Japanese economies will post modest growth in 2012. The U.S. economy is forecast to expand by 2.5 per cent this year, thanks primarily to stronger job creation, which has led to higher business and household sentiment compared to 2011.

One year after the devastating earthquake and tsunami, the Japanese economy is expanding again after real GDP declined in 2011. Growth of two per cent is expected in 2012, as strong machinery orders and housing investment plans suggest that tsunami reconstruction efforts are gaining momentum this year. Still, Japan's real GDP remains below its pre-disaster level.

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