The global economy is heading for a period of prolonged weakness and of great uncertainty, the Danish Maritime Forum was warned on 7 October.
Weak economic growth means challenges on the economic front will create potential for social unrest and 65 of the 175 countries in a survey emerged as suffering from a high or very high degree of political risk, Danbise Mayo, US economist and author, told the forum.
While technology creates lots of new opportunities, it will push large numbers of unskilled workers out of work. In the past, farm workers could find employment in manufacturing and when technological advancement reduced jobs in this sector, they could be employed in service industries. “This is why the situation is different this time,” she said.
Her comments came two days after the International Monetary Fund (IMF) warned of weak economic growth. “Six years after the world economy emerged from its broadest and deepest post-war recession, the holy grail of robust and synchronised global expansion remains elusive,” said Maurice Obstfeld, IMF economic counsellor and director of the research department.
“Despite considerable differences in country-specific outlooks, the new forecasts mark down expected near-term growth marginally but nearly across the board. Moreover, downside risks to the world economy appear more pronounced than they did just a few months ago,” Obstfeld said.
Global real GDP grew at 3.4% last year, and is forecast to grow at only 3.1% this year. Growth is expected to rebound to 3.6% next year, the IMF said.
Demographics mean that social services in developed countries will come under great pressure to cater for the needs of a growing number of old people, while in the developing world, finding employment for large numbers of youngsters is a major challenge. “50% of the population of Uganda is under the age of 15,” Mayo said.
Jorgen Ostrom Moller, a Danish economist who works both in Copenhagen and in Singapore, said in his presentation that labour-intensive manufacturing would continue to relocate to countries with growing working-age populations, because that kept wages down. In China, the working-age population will start to contract this year, while it will continue to grow in many countries in southeast Asia and in Africa.
He warned that interest rates could not remain at zero levels for much longer and pointed out that quantitative easing had created an asset bubble. “How can shares rise when the global outlook is weakening?” he asked. Once the rates start to rise, countries with large debts will find themselves in a difficult situation. This combined with bad governance in many such countries gives rise to worry about social unrest, he said. “With a bit of bad luck, we are heading for a global 1789 [the year of the French Revolution].”