Inflation spreads from emerging economies to developed economies

Posted on Apr 28, 2011 in AllEconomic News
The Ministry of Commerce released the “China’s Foreign Trade Situation Report (Spring 2011)” on April 22. The report analyzed China’s external environment and warned that inflation is currently spreading from emerging economies to developed economies.

Under this situation, emerging economies have and will take further deflation policies. In addition, the Eurozone has started to raise interest rates and the United States may even withdraw its stimulus ahead of schedule. If the inflation situation continues to exacerbate, it will certainly affect the process of the world’s economic recovery.

The report pointed out that the world economy is expected to continue to maintain growth in 2011. However, the recovery process is still arduous and tortuous. On the positive side, the pace of the U.S. economic recovery has accelerated and the economic situation of core European powers such as Germany and France continues to show a good trend. Furthermore, emerging economies will continue to maintain a rapid growth.

However, factors such as inflation spread, the sovereign debt crisis, the high international commodity prices and the Japan earthquake will force the world economy to face many uncertainties.

According to the report, the sovereign debt crisis in Europe has not been eased and will possibly escalate. The massive budget deficit of the U.S. administration has increased its debt burden, putting the United States in the shadow of a fiscal crisis. The international commodity prices will likely continue to rise or be volatile at a high level.

Particularly, the ongoing unrest in the Middle East will continue to push up the international oil prices. The massive earthquake in Japan has also posed a considerably negative impact on the recovery of the world economy. The subsequent nuclear leak has not been put under effective control and the follow-up consequences are difficult to predict.

Given the slow recovery of the world economy and the weakened or even nonexistent effects of inventory supplements in 2010, the growth in world trade will unlikely be substantial in 2011. Many countries prefer to boost exports to relieve domestic pressure and are obviously reluctant to increase imports. The rise in global trade protectionism, the impasse of the Doha Round of World Trade Organization (WTO) talks and serious trade frictions will all affect world trade in the future.

The WTO estimated that the world trade growth rate will slow to 7 percent in 2011 from a growth rate of 15 percent in 2010. The trade growth rate is expected to reach 5 percent for developed countries and about 10 percent for developing countries and the Commonwealth of Independent States (CIS).

via Inflation spreads from emerging economies to developed economies – People’s Daily Online.