World economy to keep strong but risks abound: Reuters poll

Mon Jul 18, 2011 3:02pm EDT
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By Andy Bruce

LONDON (Reuters) - The world economy should expand steadily this year and next thanks mainly to prospering emerging powers, a Reuters poll showed, but fiscal troubles lurking in Europe and potentially the United States risk blowing this view apart.

The quarterly survey of more than 350 economists from all over the world showed a dimmer outlook for most of the rich-world Group of Seven economies since the last survey in April.

Only Germany, booming thanks to buoyant exports, is expected to post growth averaging more than 3 percent this year. Elsewhere, fiscal austerity in Europe and growing debt fears have soured analysts' sentiment.

By contrast, emerging powers like China have enjoyed near double-digit annual growth rates since the global recession -- but they face risks of their own, struggling to contain rampant inflation that has accompanied fervent growth.

Economists pointed to the fiscal crisis raging in the euro zone's peripheral countries and the political deadlock in the United States surrounding an increasingly urgent lift to the country's legal debt ceiling as the biggest risks to global economic growth.

"If the (euro zone) debt crisis is mishandled, it's a major threat. But it's a threat comparable to the mishandling of the U.S. sovereign debt crisis. It's six and two threes," said Willem Buiter, chief economist at Citi.

The poll showed the world economy expanding 4.1 percent this year and 4.3 percent next year, little changed from April's survey.

Buiter said that authorities in emerging markets are largely behind the curve in monetary policy, which could leave open the prospect that their boom could become a bubble and then a bust -- but not for a couple of years.   Continued...