Report card: tries hard, could do better

Mon May 15, 2017 6:18am EDT
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By Jeremy Gaunt

LONDON (Reuters) - Setting aside a few uncomfortable economic truths such as the increasing U.S. skills gap, eye-wateringly high unemployment in parts of the euro zone, and growing income inequality in China, the world economy has been doing pretty well this year.

The issue is: how well and how sustainable?

In the United States, the economy has been strong enough for the Federal Reserve to start raising interest rates, slowly. In the euro zone, growth is robust enough for the European Central Bank to think about dropping public warnings of risks.

China, meanwhile, has so far staved off last year's dire warnings of a sharp, potentially damaging, slowdown.

But much of this comes courtesy of billions of dollars, euros, and other currencies being pumped into the global economy. In some cases, it is still being pumped in.

And the results are not exactly bracing. The International Monetary Fund expects the world economy to grow 3.5 percent this year --- not bad until you remember it averaged 4.2 percent over the 10 years before the financial crisis.

The IMF sees the U.S. economy growing at 2.3 percent this year, below the 2.6 percent average for 1999-2008. Ditto the euro zone -- 2017 growth at 1.7 percent versus 2.1 percent. For China, the numbers are 6.6 percent and 10.1 percent, respectively.

After their spring meeting last month, the IMF and World Bank sounded a bit passionless about it all.   Continued...

FILE PHOTO: A view of Hunchun Border Economic Cooperation Zone in Hunchun, Jilin province, China, March 28, 2017. REUTERS/Sue-Lin Wong/File Photo