When the countdown to midnight is over, few will look back at 2012 as a cheerful year for the world economy. The eurozone fell back into recession, with countries on its periphery paying the highest price in terms of job losses and falling living standards. Britain experienced its own double-dip and is now in its slowest recovery in 100 years. Strong figures for the third quarter confirmed that the US economy is in better health than Europe’s. However, even for the US there was no trace of the sharp rebound that some analysts had hoped for.
Yet this gloom may be overdone. Looking beyond the western world, 2012 had no shortage of bright spots to choose from. Take China. The hard landing that many had feared for Beijing did not happen, and the economy continued to grow at a sustained rate of about 8 per cent. The country is slowly rebalancing, as the proportion of national income destined for consumption is on the rise. And while its small and medium-sized enterprises are still starved of credit, the steps Beijing is taking on the road to financial liberalisation mean foreign capital could soon come to the rescue.
True, policy inaction has transformed the Indian hare into a tortoise. Red tape and high labour costs are tying up Brazil’s growth. But their regional competitors are rising fast. With growth rates of more than 6 per cent, Indonesia is tipped to replace India as the “I” in the Brics club. Meanwhile, Mexico is benefiting from the reshoring of US companies from Asia. Were its new president to deliver on the promise to take on drug crime and fight off industrial oligopolies, Mexico would be in the position to outshine Brazil as Latin America’s most dynamic economy.