No full-fledged global economic recovery in sight just yet

14 january 2016

An article titled Current Trends in the World Economy co-authored by the Analytical Center's experts Leonid Grigoriev, Alexander Golyashev and Anna Lobanova has been published in Spatial Economics Magazine.

The article looks at the global economic trends that emerged towards the end of 2015. A full-fledged global economic recovery that was expected after the great recession of 2008-2009 has never really materialized even 6 years after the formal end of the recession. While the US economy is growing and the EU economy is demonstrating only modest games, the GDP growth in China is slowing down, Russia and Brazil are experiencing serious economic downturns.  However, even in countries with the positive GDP growth, the pace of growth began to slow down in the second half of 2015. Experts believe there is every reason to conclude that we will not be seeing the kind of across-the-board large scale global economic growth we experienced in 1990-2008 anytime soon.

The article focuses on the economies of the large Middle East, i.e. the Arab nations, Iran and Turkey. The region is characterized by extreme inequality in the level of economic development that depends on three key parameters: availability of oil production, population and its growth, and stability of the social and political situation. Naturally, countries that export oil have greater revenues (this is especially true of four Persian Gulf kingdoms), but their revenues are also much more volatile and dependent on the global price of oil. The economic growth in the majority of the countries in the region is barely enough to take care of the growing population, which breeds poverty and instability. Consequently, the improvement of the living standard depends entirely on opportunities to boost the economic growth.

Naturally, the economic growth depends not just on internal and external factors, but also on the state and nature of country’s institutions. Authoritarian regimes, corruption, weak democratic institutes also undermine the foundations of economic growth and social and political stability of the regimes in a number of countries in the Middle East. Experts conclude that the recent series of revolutions, wars and conflicts have failed to bring about tangible improvements in the quality of life and faster economic development.