Future prospects for world economies

After generally positive economic trends in 2010 we have had a difficult year so far in 2011.

A turbulent summer of sovereign debt crises in the US and Europe, sharp equity market falls and signs of slowing growth around the world, are affecting the future prospects for the world and UK economies.

In this video John Hawksworth, Richard Snook and Robert Vaughan share their views on the impact of these changes, examining the US and Europe economies, growth prospects, the risks of a double dip recession and the possible Government responses.

In the US the economic recovery has stalled in 2011. We are expecting growth of just 1.6% in 2011 and around 2% in 2012, down from a brisk 2.9% in 2010. This will impact the global economy as the US still makes up well over 20% of the global economy and is important in driving demand elsewhere, notably, China and South America, but also Europe.

The continued European sovereign debt crisis has spread from smaller countries like Greece, Ireland and Portugal initially to Spain and more recently also Italy. There has been a sharp rise in government debt amid a background of weak growth in these Eurozone economies and this has hit market confidence in the ability of these states to service and repay their debt. Weak growth should continue but the previous picture of a two track recovery, of weak peripheral members and relatively strong core members (France and Germany) has diminished - as the core has been weakened by the crisis.

For the UK economy, the global slowdown means that the outlook for domestic sources of growth in the UK remain weak and the risks of a double dip recession have increased. A big question at the moment is whether the Government has a plan B. However, it is important to remember that plan A already has a fair amount of flexibility - areas like unemployment insurance will act as an automatic stabiliser, increasing spending if the recovery is weaker than expected. Additionally, with the growth outlook now weaker than in March, the deficit targets are likely to be reached later than originally thought, unless further cuts are made.

So what does the remainder of the year look like? The economic outlook is very uncertain, there will be a fairly slow and bumpy recovery in the US and Europe. There are downside risks to all world economies and any business would be sensible to have a contingency plan against a double dip recession.

Our videos provide the latest economic updates and business insights, hosted by our economic specialists:

Building better broadband coverage

Roadmap to reform of the UK power industry

Analysing country risk