World Economy Is Yet To Recover From Low-growth Syndrome

Policy has not addressed effectively low growth brought on by the global financial crisis, which predates the new threats of unresolved trade tensions and shocks such as coronavirus

- CP Chandrasekhar & Jayati Ghosh

Discussions on the state of the world economy centre around the likely negative impact of the novel coronavirus epidemic and the potential positive effect of the truce reflected in the ‘Phase 1’ trade deal between China and India. Though most of the confirmed infections and deaths due to the virus have been confined to China (where the numbers at the time of writing exceeded 37,000 and 800, respectively), the role that the country plays in driving global growth has increased concern that the adverse impact the epidemic will have on China’s economy will spill over globally.

On the other hand, the trade deal between the US and China, while partial and limited, is viewed favourably because of the positive signals that sends out with respect to growth in global trade.

While these assessments are valid, they divert from a more worrying aspect of global economic performance, which is the fact that the low rate of global growth that followed the great recession — triggered by the 2008 global financial crisis — is still a reality.

The global economy has yet to be set on a path of robust recovery. Indifferent economic performance in the US, a persisting crisis in Europe and Japan and the slowing of growth in China and India have combined to cap global growth. In that sense, the crisis affecting the world economy predates the coronavirus shock by a wide margin.

Global performance