In 2014, the global economic recovery was basically consolidated, the labor market continued to improve, prices fell steadily, and the level of public debt was generally stable. At the same time, the differentiation of economic growth rate of various economies has intensified, and international trade and foreign direct investment are still in a low-speed growth channel, lacking growth momentum. The International Monetary Fund (IMF) predicts that the world economic growth rate in 2014 will be 3.3% in terms of purchasing power parity (PPP) and 2.6% in terms of market exchange rate, which is 0.3 percentage points and 0.4 percentage points lower than its forecast data in October 2013, respectively. Considering the protracted crisis in Ukraine and the economic sanctions imposed on Russia by western countries, the spread of Ebola epidemic in West Africa and the continuous tension and turmoil in the Middle East, especially the fact that some major economies are facing increasing downward pressure and the time lag of stimulus policies, it is not excluded that the final statistical result of the world economic growth rate in 2014 will be lower than the current IMF estimate.
Review of the overall situation of the world economy in 2014
In order to comprehensively reflect the overall development of the world economy in 2014, the analysis of this report will be carried out from five aspects: economic growth, employment situation, price level, trade and investment, and public debt.
I. Growth: The recovery is slow and the growth rate is divided.
In 2014, the world economy generally continued the slow recovery of the previous year, and the economic growth rate was lower than generally expected, and the growth rate differentiation of various economies intensified. According to the forecast data of IMF in October, the world economic growth rate in 2014 was 3.3%, which was the same as that in 2013. The economic growth rate of developed economies is 1.8%. Among them, the US economic recovery was consolidated, with an increase of 2.2%; The euro zone economy reversed the negative growth of last year and increased by 0.8%; Japan’s economy declined, growing by 0.9%. The economic growth rate of emerging markets and developing economies is 4.4%, which continues the continuous decline since 2010. The economic growth rates of Brazil, Russian, Indian and China are expected to be 0.3%, 0.2%, 5.6% and 7.4% respectively.
Second, employment: overall improvement but different performance.
The US labor market improved significantly in 2014, and the unemployment rate continued to decline. In November 2014, the unemployment rate dropped to 5.8%, the lowest level since August 2008. Employment in Europe improved slightly. The seasonally adjusted unemployment rate in the first three quarters of 2014 was 11.6%, of which the unemployment rate in September was 11.5%. In the first three quarters of 2014, the unemployment rate in Japan further dropped to 3.7%. The employment situation in emerging market countries has generally improved, but the performance is not the same. In the first three quarters of 2014, the registered urban unemployment rate in China was 4.1%. In September, Brazil’s unemployment rate fell to 4.9%, the lowest monthly level since 2002. The unemployment rates in Russia and South Africa in the first three quarters were 5.1% and 25.4% respectively.
Third, prices: generally stable and declining, and the risk of deflation is rising.
In 2014, the global inflation level was lower than that in 2013. According to OECD statistics, in September 2014, the consumer price index (CPI) in the United States rose by 1.7% year-on-year, up by 0.2 percentage points from the end of 2013. The CPI of Germany, Britain, France and Italy increased by 0.8%, 1.2%, 0.3% and -0.2% respectively, which decreased by 0.6, 0.8, 0.4 and 0.9 percentage points respectively compared with the end of 2013. Japan reversed the long-term price downturn. In September 2014, the CPI rose to 3.2% year-on-year, up 1.6 percentage points from the end of 2013, and it is expected to be 2.8% for the whole year. According to the IMF forecast data, the inflation rate in emerging markets and developing economies was 5.5% in 2014, which was 0.3 percentage points lower than that in 2013.
IV. Trade and investment: Low growth
According to UNCTAD data, global trade in goods increased by 1.6% in the first half of 2014. According to the forecast data of the World Trade Organization (WTO), the global trade in goods increased by 3.1% in 2014. At the same time, the trade balance of major economies is generally balanced. According to UNCTAD’s forecast data, the global FDI inflow in 2014 was 1.618 trillion US dollars, an increase of 11.5%. Among them, FDI inflows in developed economies and developing economies increased by 34.8% and -1.8% respectively.
V. Public debt: stable and generally controllable.
The IMF predicts that the fiscal deficit of developed economies will fall to 3.9% of GDP in 2014, and the developed economies as a whole have curbed the rapid rise of government debt. It is estimated that in 2014, the total government debt of the United States, the euro zone and Japan will account for 105.6%, 96.4% and 245.1% of GDP, respectively, up by 1.4, 1.2 and 1.9 percentage points compared with 2013; The ratio of German government’s total debt to GDP is estimated to be 75.5%, down 2.9 percentage points from 2013. The fiscal deficit and public debt of emerging markets and developing economies both increased slightly. In 2014, the fiscal deficit and total government debt accounted for 2.1% and 40.1% of GDP, respectively, up 0.4 and 0.8 percentage points from 2013.
Characteristics of World Economic Operation in 2014
The world economy showed many new features and changes in 2014. To sum up, it is mainly manifested in the following aspects.
First, the adjustment of US monetary policy has produced spillover effects.
On October 29th, 2014, the Federal Open Market Committee (FOMC) announced that it would stop buying assets, thus ending the unconventional quantitative easing monetary policy (QE) launched in November, 2008. For other economies, the spillover effect of US monetary policy adjustment will bring great pressure to them. On the one hand, the gradual tightening of liquidity in the United States may lead to further capital flight from other economies, especially emerging markets and developing economies, currency depreciation and impact on its fragile banking system; On the other hand, the monetary policies of other economies have to be adjusted adaptively, thus adding new uncertainties.
Second, the monetary policy of developed economies has diverged
Although the Federal Reserve has begun to withdraw from quantitative easing and may enter the channel of raising interest rates in mid-2015, developed economies such as the euro zone and Japan continue to implement the largest expansionary monetary policy in history. On June 5, 2014, the European Central Bank (ECB) decided to cut the benchmark interest rate by 10 basis points to 0.15%, making it a record low. For the first time, the overnight deposit rate of banks was reduced to negative, which was -0.1%. On October 31, the Bank of Japan announced that it would expand the purchase scale of government bonds from 50 trillion yen to 80 trillion yen per year. Significantly, the unconventional expansionary monetary policies in Europe and Japan run counter to the adjustment direction of American monetary policy.
Third, emerging markets and developing economies have entered a medium-and high-speed growth cycle.
According to IMF data, from 2000 to 2012, the average annual GDP growth rate of emerging markets and developing economies was 6.2%, but since 2010, the GDP growth rate of emerging markets and developing economies has dropped from 7.5% to 4.4% in 2014. The reason is that the ultra-low interest rate environment for many years began to disappear with the turn of American monetary policy; Secondly, with the slowdown of growth and the weakening of unconventional incentive efficiency, the commodity boom cycle has come to an end; Thirdly, the dividend-rich period brought about by the previous reforms in various countries has come to an end, and the residual potential of the government supporting economic growth has been weakened; Finally, the opening cycle of developed economies has changed, and the opportunities for many emerging markets and developing economies to gain asymmetric benefits from the market opening of developed economies have decreased.
Fourth, international trade has entered a low-speed growth channel.
The reason for the mediocre growth rate of global trade is not only the slow growth rate of the global economy, but also the lack of progress in global multilateral and bilateral trade and investment liberalization negotiations. However, the more basic reason is the basic stereotype of the pattern of international trade division of labor. The fastest growth period of global trade after World War II occurred between 1989 and 2006, during which the growth rate of trade was 2-3 times that of economy, mainly due to the end of the Cold War, especially the beginning of fragmentation of production chain, which was marked by the establishment of the North American Free Trade Area in 1994. China’s entry into WTO in 2001 also greatly promoted the dazzling growth of international trade. Since 2007, with the establishment of global value chain, the world has entered a period when trade and output have increased at the same level.
Five, multiple factors lead to the collapse of crude oil prices.
On December 18, 2014, the average price of crude oil in the spot market in London, England, fell to $56.1/barrel, which was nearly 50% lower than the high point in June. The direct cause of the drop in crude oil price is the weakness of energy demand and the increase of supply. The growth rate of major energy importers such as Europe and China has slowed down, and the United States has also reduced its crude oil imports due to the continuous increase in oil and gas production, resulting in a decrease in energy demand in the international market. At the same time, Russia and Saudi Arabia, two major oil producers, have recently increased their production. Oil supply and demand and price changes are also due to the oil-gas game between the United States, Saudi Arabia and OPEC and the reduction of Russian oil revenue by western countries by suppressing oil prices. In addition, the US dollar index has been fluctuating and rising since the Federal Reserve gradually withdrew from the quantitative easing policy, which has contributed to the decline in oil prices. The sharp fluctuation of oil prices has a far-reaching impact. It is estimated that a drop of $10 per barrel in oil price means that 0.5% of global GDP is transferred from oil exporting countries to oil importing countries.
6. Global debt continued to rise and began to threaten the consolidation of recovery.
According to the Geneva World Economic Report, in 2001, the global total debt covering the private sector and the public sector accounted for 160% of the national income; In 2009, after the outbreak of the financial crisis, this proportion was about 200%; In 2013, this proportion rose to 215% again. Judging from historical experience, all "economic miracles" will come to an end after the debt is high. High debt level inevitably requires maintaining a low level of interest rate, otherwise the debtor will face great pressure to pay off debts. However, the global interest rate level is generally low, and the cost of borrowing is reduced, thus accelerating the accumulation of debt. The coexistence of low interest rates and rising asset prices makes the balance sheet look less stretched. However, once there is a global leverage crisis-asset price decline forces credit crunch-or a liquidity crisis, asset prices will fall further and form a vicious circle. At present, some economies have seen the trend of "toxic combination" of low inflation, low growth and high debt accumulating. De-leveraging is both imminent and has a long way to go.
Seven, Western sanctions against Russia have led to subtle changes in international economic relations.
On March 16th, 2014, the Crimea and Sevastopol regions of Ukraine held a referendum on the issue of "leaving Ukraine and entering Russia". On the 17th, the Crimean Parliament declared its independence from Ukraine and applied to join the Russian Federation according to the results of the referendum. On the 18th, the Russian Federation signed a treaty of accession to Russia with the Republic of Crimea and Sevastopol. As a result, western economies, represented by the United States and Europe, began to launch several rounds of economic sanctions against Russia, which covered the prohibition of entry of specific personnel, freezing of assets of entities and individuals, suspension of financing cooperation, embargo on specific commodities and restrictions on technology transfer. The economic sanctions imposed by western countries have a rapid adverse impact on Russia, such as capital flight, devaluation of the ruble, slow growth and reduced trade. At present, western sanctions against Russia have had an impact on the flow of international trade and the closeness between countries. If sanctions persist and are constantly strengthened, it is likely to cause profound changes in global geopolitics and economy.
8. China has played a prominent role in international and regional cooperation.
At the summit held in Brazil in July 2014, BRICS leaders decided to start the preparatory plan for the BRICS Development Bank. The BRICS Development Bank, which is expected to officially start operation in 2016, marks that BRICS cooperation has entered a substantive stage of institutionalized construction. On October 24, 2014, 21 countries signed a memorandum on the establishment of an Asian infrastructure investment bank in Beijing. In November 2014, the supreme leader of president, China announced the establishment of the Silk Road Fund at the 2014 Asia-Pacific Economic Cooperation (APEC) Business Leaders Summit to provide investment and financing support for infrastructure construction, resource development, industrial cooperation and other related projects along the Belt and Road; In the same month, 21 members of Asia-Pacific Economic Cooperation (APEC) gathered in Beijing to discuss such important issues as "promoting regional economic integration", "promoting economic innovation, development, reform and growth" and "strengthening all-round interconnection and infrastructure construction" around the theme of "building a future-oriented Asia-Pacific partnership", and new progress has been made in the construction of the Asia-Pacific Free Trade Area (FTAAP).
Income inequality is increasingly threatening the long-term growth of the world economy.
The inequality of income and wealth has become an unavoidable problem today. According to the British "Economist" data, at present, the richest 8.6% of the adult population in the world owns 85.3% of the world’s wealth, while the poor, who account for 69.8% of the world’s total population, own only 2.9% of the world’s total wealth. A booster that makes income distribution the focus is Thomas? The publication of Picchetti’s Capital in the 21st Century. Picchetti’s core view is that the rate of return on private capital is greater than the growth rate of output, which means that wealth accumulation is faster than the growth of output and wages, which inevitably makes entrepreneurs gradually become rentiers and make them dominate those who have nothing but labor ability more and more strongly; The proper solution is not to levy enough taxes on capital, but to levy an annual progressive capital tax in order to protect the incentives for new primitive accumulation.
Prospect of the overall situation of the world economy in 2015
According to the forecast data of IMF in October 2014, the world economic growth rate calculated by PPP in 2015 was 3.8%. Among them, the developed economies grew by 2.3%, the United States by 3.1%, the euro zone by 1.3% and Japan by 0.8%. Emerging markets and developing economies as a whole grew by 5.0%, China by 7.1%, India by 6.4%, Brazil by 1.4%, Russia by 0.5% and South Africa by 2.3%. At the market exchange rate, the world economy grew by 3.2% in 2015. In June 2014, the World Bank predicted that the world economic growth rate calculated by PPP and market exchange rate in 2015 would be 4.0% and 3.4% respectively. In May 2014, the United Nations predicted that the world economic growth rate calculated by PPP and market exchange rate in 2015 would be 3.8% and 3.2% respectively. In May 2014, OECD predicted that the world economic growth rate calculated by PPP in 2015 would be 3.9%. Looking forward to the world economic trend in 2015, there are the following problems worthy of attention.
First, the extent to which the monetary policies of the United States run counter to those of other important economies such as Europe and Japan and the seriousness of the consequences.
With the withdrawal of quantitative easing policy from the United States, whether to raise interest rates has become the focus of US monetary policy. Once inflation rises, the probability of the Fed raising interest rates in the first half of 2015 will increase. While the monetary policy in the United States is tightening, Europe and Japan continue to increase the stimulus. This reverse macro policy will have many effects, the most obvious of which is exchange rate fluctuation. The appreciation of the US dollar is beneficial to the recovery of European and Japanese exports, but at the same time, it will cause capital to gather in the United States, thus offsetting the effect of the loose monetary policy of the European and Japanese central banks. If the exchange rate of the US dollar fluctuates greatly, it will also cause large-scale changes in global asset prices and capital.
Second, the possibility of the European economy out of the downturn
At the beginning of November, 2014, the Council of the European Central Bank finally agreed to inject 1 trillion euros (about 1.24 trillion US dollars) for the purchase of guaranteed bonds and asset-backed bonds, so as to prevent the euro zone economy from falling into deflation. The balance sheet of the European Central Bank expanded from 2 trillion euros to the peak of 3 trillion euros. If the euro zone continues to face the threat of Japanese-style deflation, this move will also pave the way for the large-scale purchase of government bonds in the future. The Council of the European Central Bank also decided to keep the refinancing rate at an ultra-low level of 0.05%. Such a large-scale and long-term loose monetary policy has laid a hidden danger for the long-term growth of the economy while preventing further deterioration of the economy. Without the corresponding and powerful investment and growth support of the real economy, it is difficult to completely rule out the possibility that the European economy will fall into recession again.
Third, the ultimate effectiveness of "Abenomics"
In 2013, after the first two arrows of "Abenomics" were launched, it achieved certain results, and the Japanese economy achieved a growth rate of 1.5%. However, since 2014, the market’s policy expectation of "Abenomics" began to decline, and the signs of Japanese economic stagnation also appeared. The main reason is that the third arrow of "Abenomics" has not been shot, that is, the existing policies have not fully touched on structural reforms, such as rigid labor market and excessive corporate tax. At the same time, the ultra-high level of national debt, aging population, declining productivity growth, slow progress in agricultural reform and the second round of consumption tax increase from 8% to 10% in 2015 will all affect the realization of the "Abenomics" goal to varying degrees.
Fourth, the scope, intensity and effectiveness of the new round of reform in major emerging economies
In order to implement the strategic plan of the 18th CPC National Congress on comprehensively deepening reform, the Third Plenary Session of the 18th CPC Central Committee in November 2013 adopted the Decision of the Central Committee of the Communist Party of China on Several Major Issues of Comprehensively Deepening Reform, covering 15 fields and 60 specific tasks. At present, some reform measures have been implemented. In May 2014, the new Indian Prime Minister Narendra? After Modi took office, he immediately launched a large-scale economic reform plan with the goal of "economic growth", including increasing investment, promoting industrial growth, improving the business environment and strictly controlling the fiscal deficit. The "dividend" released by the reform of China and India will directly determine whether they can continue to maintain the current medium-to-high-speed sustainable growth situation. At the same time, whether the economic downturn of Brazil and Russia can be contained will also have an important impact on the economic performance of the entire emerging markets and developing countries.
V. Potential risks in the global financial system, especially in developed countries
According to the Economist magazine, the next crisis will come from the asset management industry. In 2013, global asset management companies managed assets as high as US$ 87 trillion, accounting for three-quarters of banking assets, of which Black Rock Asset Management Company managed assets of US$ 4.4 trillion, larger than any bank. However, these huge asset management companies are not systemically important financial institutions (SIFIS), so they are not supervised by financial supervision departments. In order to meet the conservative accounting requirements, their profit model has begun to become an unstable amplifier, among which the fastest growth is the exchange-traded funds active in the short-term bond market. In January 2014, the Financial Stability Board (FSB) raised the question of whether to include asset management companies in SIFIS, and the Bank of England also warned about the potential harm of its activities. Once there is a problem with an asset management company that is less regulated, its chain reaction is bound to spread rapidly.
VI. Trends of geopolitics and economy
The scope, intensity and duration of sanctions imposed by western countries on Russia will not only affect the economy of Russia and countries with close economic relations with it, but also affect the geopolitical relations of relevant countries. After the mid-term elections in November 2014, the Republican Party controlled the Senate and the House of Representatives, which made the Democratic President a "lame duck" prematurely, and also added variables to the sensitive and subtle big country game. As an important energy center in the world, the stability of the Middle East is closely related to the rise and fall of the Islamic State. Once a major terrorist attack succeeds in other countries in the world, the first to be affected is the supply and price of oil, and the further consolidation of the world economic recovery will also be threatened.
Seven, large-scale epidemic and natural disasters
In 2014, the outbreak and spread of Ebola in West African countries have had a negative impact on the economic and social stability of some countries. If it is not effectively controlled and spread to major economies, it will affect global economic growth. At the same time, sudden serious natural disasters will also bring shocks to the economies of relevant countries.
In view of the current basic situation of the world economy and various signs of its development trend, and based on the description and analysis of the overall operation of the world economy in 2014, this report holds that the probability of a sharp recovery of the global economy in 2015 is small, and compared with 2014, it is more likely that the economic growth rate will be basically flat or slightly increased, that is, the growth rate calculated by PPP is 3.3%, and the growth rate calculated by market exchange rate is 2.8%. Among the four major economies in the United States, Europe, China and Japan, China is still likely to continue the inertia of the past years and become the country with the greatest contribution to global economic growth.
(The first author is the director of the Institute of World Economics and Politics, Chinese Academy of Social Sciences; The second author is the deputy director of the International Political Economy Research Office of the Institute of World Economics and Politics, Chinese Academy of Social Sciences)
(Contemporary worldmagazineAuthorized People’s Daily Online-the Communist Party of China (CPC) Press Release, please do not reprint.)
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