Local protests and political turmoil have the potential for negative effects on economic prospects in the Middle East, according to Deloitte Research’s second-quarter 2011 Global Economic Outlook.
The report released on Thursday examines the changes rippling through the global landscape and said that the recent world events in the Middle East and around the world have prompted a renewed focus on rising energy costs and higher food prices.
“The repercussions will likely shift the global economic landscape in the near term,” it said.
In the second-quarter issue of the Global Economic Outlook, Deloitte member firm economists examine the effects of these events and offer their insights on global food inflation and soaring energy costs. The report also sheds light on the rise of income inequality across the world.
“Since our last quarterly outlook, the world has been awash with unexpected events,” said Ira Kalish, Director of Global Economics, Deloitte Research, part of Deloitte Services LP in the United States.
“In this case, political events in the Middle East and the ruinous earthquake and tsunami in Japan have cast a shadow over the global economy. In this issue we examine the continuing evolution of the global recovery, including challenges to growth in the affluent markets and the fight against overheating in the emerging world.”
At the heart of the report is the global economic impact of the current political unrest in the Middle East and the outlook for growth in a world of volatile energy prices. The issue also examines topics such as soaring food prices, rising income inequality, and the global impact of the recent Tohoku earthquake in Japan.
The report said that the policy makers in Japan would keep a watchful eye on the currency lest the yen rise too rapidly; however, the authors’ state that Japan’s rebuilding efforts could also rekindle much needed inflation.
In the short run, it added, the political environment in the Middle East is likely to remain fragile, according to the authors. Oil prices may continue on a volatile path until the political climate stabilizes. Given the influence of the region on the global economic recovery, developments in the Middle East and North Africa will be monitored closely by the rest of the world.
The outlook on the United States economy is optimistic, though with commodity prices on the rise and inflation picking up worldwide, the authors suggest that the stage is set for the liquidity trap to melt.
The Eurozone recovery is exposing the cracks between member states – high debt among fringe nations and high inflation in the core. Authors expect some imbalances in the United Kingdom as well, as the economic focus shifts from consumers and government toward the revitalized private sector.
The outlook for India and Brazil remains healthy. Fiscal conservatism will go a long way to increase market confidence and encourage business spending, according to the authors.
The authors say that in China, rising oil prices and changing demographics will lead the Chinese economy to expand at a more sustainable pace.
The Russian economy is poised for growth on the back of higher energy prices. However, authors say that sustainable growth depends on investments in energy production, scaling back of payroll taxes, and greater transparency.