The U.S economy, the global engine, has been on a never-ending decline for two consecutive years, and is already on the brink of recession: a phenomenon which is not only unprecedented in the contemporary U.S., but also sends the global economy spiraling as well.
Overshadowed by a variety of factors, especially the sub-prime loan crisis, the U.S. economy has been plummeting incessantly since 2007. In its latest World Economic Outlook (WEC), the International Monetary Fund (IMF) cut its 2008 U.S. GDP growth forecast by 0.9 percentage point, to 1.9 percent; and cut the 2007 forecast 0.1 percentage point, also to 1.9 percent.
One of the short-hand measures of whether a nation is suffering from a recession is two or more consecutive quarters in which the GDP is negative. A potential recession looms large over the US economy in 2008; although a recession cannot technically be determined until the National Bureau of Economic Research looks at a variety of detailed economic statistics in the future.
Additionally, the depreciation of the U.S dollar against the euro as well as the Japanese yen, has dropped to historically low levels in recent days. The dollar's dive can impact the U.S economy in the form of inflation, as imports become more expensive in dollars. The falling dollar is also fueling speculation in commodities like oil: another source of inflation that is sapping US consumer buying power.
However, the weak dollar is not all bad news to the US economy. By making American products cheaper overseas, the soft dollar has increased the demand for US exports around the world. Consequently, exports have emerged as the silver lining in the otherwise cloudy U.S. economy. Some analysts observed the weak dollar as "a net positive" for growth in the US economy.
Moreover, the economic slowdown could breed trade protectionism, which is commonly adopted by developed countries to share out their own troubles when bogged down in a recession. In so doing, the anti-dumping and anti-subsidizing policies, and technical trade barriers will not only endanger the emerging economies; but also will cause the global trade environment to take a turn for the worse.
In contrast, the eroding power of the U.S. economic engine would grant momentum to emerging markets, which actually contribute in a greater way to global economic growth. According to WEC forecasts, the 2008 economic growth for China, India, Brazil, South Africa and Russia are respectively 10, 8.4, 4, 5.1 and 6.5 percent, accounting for 70 percent of total growth in the world. And China will overtake the U.S. for the first time in its share boosting of global economic development. The emerging economies will act as a living force to drive the world market back to a balance in face of the economic storms sweeping the globe.
By People's Daily Online
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