none
none
none
none

US economy still on the brink, warns EFIC

31-08-2010
by 
in 
US economy still on the brink, warns EFIC

 

The Export Finance and Insurance Corporation (EFIC) says caution is still warranted on the global economic outlook.
 
In the latest issue of its World Risk Developments report, EFIC cites risks in the US and the euro area as “a potential threat to improving macroeconomic prospects.”
 
The report notes a major risk is still a US fiscal event, which could force the US economy back into recession.
 
It says the planned “sequester” of billion of annual cuts to US defence and domestic spending due in March could cut nearly one per cent off US GDP. This would add to January’s tax increases, which were equivalent to 1.5 per cent of GDP. 
 
In addition, a continuing resolution to fund federal spending could lapse in April, and in May the US Government is expected to hit its debt ceiling, preventing it from undertaking any further borrowing.
 
“If Congress allows the sequester to bite and the continuing resolution to lapse, the resultant fiscal drag could send the American economy back into recession,” said EFIC Chief Economist Roger Donnelly.
 
“And if it doesn't lift the debt ceiling, the US Treasury could be forced into a partial debt default.”
 
Another concern is the continuing liquidity trap in the UK, US and euro area. The report notes that private demand in those economies is inadequate to absorb idle capacity and labour, despite interest rates being near zero.
 
In addition, national governments in the euro area are still struggling to restore debt sustainability despite carrying out draconian budget cuts.
 
“The problem is interest rates on public debt remain well above nominal GDP growth, so even with primary (non-interest) fiscal surpluses, debt continues to rise as a percentage of GDP,” Mr Donnelly said.
 
Despite these factors, the report notes that the world economy continues to record growth near its historical average, thanks to emerging economies accounting for a larger share of world growth.
 
It notes that these economies accounted for 80 per cent of world growth in 2012 and are expected to do so again in 2013.
 
Export Finance and Insurance Corporation (EFIC)
Ph: 1800 887 588

Related news & editorials

  1. 28.04.2017
    by      In
    Water and wastewater treatment specialist CST Wastewater Solutions has set up a dedicated full-time service division to support its proven technologies for wastewater treatment, fine screening and grit removal.
    “Waste water treatment and water recovery technologies have advanced significantly in... Read More
  2. 28.04.2017
    by      In
    Available now, the April edition of Efic’s World Risk Developments examines the impacts of Cyclone Debbie on coking coal exports; questions whether stronger world trade growth will boost Australian commodity producers; and looks at the potential for US trade policy diversification.
    Coking coal... Read More
  3. 28.04.2017
    by      In
    The 2017 edition of the annual Verizon Data Breach Investigations Report contains some sobering messages for the manufacturing sector, with both cyber-espionage and ransomware attacks on the increase.
    The report, which is the tenth to be produced by Verizon, includes data from 65 contributing... Read More
  4. 27.04.2017
    by      In
    A new system developed by engineers at MIT could make it possible to control the way water moves over a surface, using only light.
    This advance may open the door to technologies such as microfluidic diagnostic devices whose channels and valves could be reprogrammed on the fly, or field systems that... Read More