Schroders 2013: A year in the global economy - Keith Wade and Azad Zangana
Schroders’ Chief Economist Keith Wade and European Economist, Azad Zangana, discuss why the global economy hit another soft patch in 2012 and share their views on other economic factors that had an impact over the last 12 months.
"There are two reasons why the world economy slowed down this year. The first is the slowdown in the eurozone: global trade with the eurozone has fallen off very sharply as the region has cut back on activity.
"The second reason is that capital spending has been very weak. This came as a bit more of a surprise because companies have a lot of cash on balance sheets and are very profitable – so normally we would expect them to be spending more. They are being held back by uncertainty about the eurozone and the recent US election and the looming ‘fiscal cliff’."
"The eurozone was a major drag on the global economy through 2012. We had an escalation of the eurozone debt crisis which caused bond yields to rise substantially throughout the peripheral economies. This meant that companies really struggled to borrow through financial markets which of course hurt their profitability and activity.