The world economy had a good 2013. Of course for many it was still a struggle, with the eurozone in recession for much of the year and living standards in most of the developed world still below their 2007 peak. But by the end, even the laggards had started to catch up, and for them the long nightmare of recession and its aftermath began to recede.
There are two great stories in the world economy: the structural shift from the developed world towards the emerging world; and the cyclical climb out of a nasty recession. The first continued last year, but at a slightly slower pace than before. Growth in China, at 7.5 per cent, might seem breathtakingly fast, but actually it’s the slowest for 23 years. Things also slowed in India, to a little below 5 per cent, again fast by our standards, but slow when compared to the past. Africa, encouragingly, grew by more than 5 per cent.
As for the second story, in the developed world what had started as an uneven and patchy recovery began to strengthen. The US, despite having to cope with feuding over its budget, seems to have sped up. It has been creating jobs and its housing market and Wall Street have moved up sharply. So the question there is what happens when the boost from the Federal Reserve’s easy money policy is reduced next year? Most commentators are optimistic.
Here in Britain there has also been a burst of optimism. Early in the year there was speculation of a “triple dip”. As it turned out, figures showed there had been no second dip, and growth strengthened steadily. By the end of the year the UK had become – on some counts – the fastest growing large developed economy. This was led by higher consumption, in turn leading to fears of overheating in the housing market. But while it might be “the wrong sort of growth”, most commentators acknowledged that prospects for 2014 were brighter still.
In Europe there was a better story too, though an uneven one. The north, led by Germany, had a solid year, reducing unemployment and boosting living standards. Across the Mediterranean the pattern was more disappointing, with Italy, Spain, Portugal and Greece all enduring a year of rising unemployment. However, the numbers have started to improve. Europe and the euro are not out of trouble, but the acute phase of their difficulties may be past. All this bodes better for 2014, which may see better and more balanced growth than any year since 2007.