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The global economy in 2013: Is stability within reach?

• Published on 14 Jan. 2013 • Category : nyforum

January is a time not only for New Year’s resolutions but also for predictions – projections of hopes and anxieties about the year ahead. This January, media outlets have been active in offering readings of the crystal ball, and the Economist magazine posed a key question to readers in a debate online: will the world economy be in better shape in 2013 than in 2012?

This question is one on which much will hinge – the years since 2008 have seen plenty of turmoil. According to some experts, however, it appears that the signs are pointing up, and Christine Lagarde, the MD of the IMF, was cautiously optimistic about the global economy’s prospects.

Lagarde suggested that the transformations we have seen – in Europe, Asia, Latin America, Sub-Saharan Africa and elsewhere – would ultimately yield positive results. But she outlined the challenges lying ahead: leaders will need to move beyond the Eurocrisis, establish a stronger global financial system, and facilitate more inclusive routes toward growth. “Achieving these milestones presupposes greater global cooperation,” she explained. “A world that is bound closely together must be a world that works closely together if it is to prosper together.”

Joseph Stiglitz, the Nobel Laureate in economics, foresaw risks in both Europe and the US and noted that one of the lessons of 2012 was that politics and economics are inseparable. The responses to crises have too often been inadequate. While the economies of those regions appear to have muddled through, Stiglitz issued a warning to their leaders: “The problem with brinkmanship is that, sometimes, one does go over the brink.”

When US politicians avoided the fiscal cliff at the start of the year – waiting right until the deadline to do so – their actions manifested just such brinkmanship, creating an atmosphere of extreme uncertainty. That sort of manufactured crisis is something the US, and the rest of the world, can surely do without.

Even so, it appears that optimism is taking hold. In the Economist magazine’s debate about the global economy, 61% of readers were upbeat about 2013. Perhaps the thought of more instability is just too much to bear. As one reader noted, “After a stressful year I believe optimism should be in order.”

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