International outlook for 2013.

• Author: Mafi-Kreft, Elham
• Position: Emerging economies and global economy - Statistical data

Because of weak growth, 2012 is not going to be remembered as the year where the major advanced economies rebuilt confidence in their medium-term prospects. With deficient confidence in the advanced economies, uncertainty will once again dampen our global growth forecast in 2013. As a result of the cautious growth expected out of the emerging economies and the

uncertainty in the advanced economies, the global economy is expected to grow at just 3.6 percent this coming year.

This article looks at what some economists are preemptively calling the perfect storm of 2013 and will shed light on the threats for the global economy.

Our economic environment in the second decade of the 2000s is perceived differently from the first one. First, what the subprime financial crisis made apparent to all of us is that we, as American citizens, are living beyond our means. By exposing the extent of our global interdependence, the crisis highlighted the weaknesses of the banking system and demonstrated how the interdependence compounds the systemic risk prevalent in a weak financial market. This weakness obviously threatens not only the financial institutions of Europe, but global institutions as well. Secondly, the U.S. policy response to the subprime crisis, followed by the European sovereign crisis, revealed that many developed countries' governments are also living beyond their means. Finally, the frequency and intensity of the turmoil in the Middle East, and in particular the instability brought on by Iranian politics in the region, is creating volatility as leading economies, like the United States, the European Union (EU), China, India and Japan, are net importers of oil.

Uncertainty Created by Higher National Debt in the Advanced Economies

Large public debts almost always lead to higher long-term interest rates, higher future taxation, higher inflation, greater uncertainty and, therefore, greater vulnerability to crises. With these threats in mind, the large public debt in the advanced economies is likely to have an adverse effect on investment, productivity and economic growth.

In the United States, the inability of Congress to plan a way to change the path of our public debt will hurt us in the long run, but in the very near future it forces us to face a "fiscal cliff." The fiscal cliff refers to the expiration of Bush-era tax cuts (threatening consumer's disposable income) and the launch of automatic annual spending cuts spread over the next decade...