• by Yilmaz Akyuz
• Monday, June 11, 2012
• Inter Press Service

Global economic conditions continue to have a strong bearing on production, trade and investment in developing economies. In this respect the current landscape is not very encouraging. After three years of recovery the world economy still remains highly fragile. The short-term outlook predicts contraction in several advanced economies in Europe. Growth in others, including the U.S., is weak and erratic. But more importantly, medium term prospects are bleak almost everywhere, writes Yilmaz Akyuz, chief economist of the South Centre.

At a first glance, the recent record looks very promising for developing economies. During 2003-08, the average growth of developing economies exceeded that of advanced economies by some five percentage points, compared to around one point in the 1980s and 1990s. The difference widened during 2008-11 as most developing economies proved resilient to the crisis while advanced economies collapsed.

This growth divergence has widely been interpreted as the South decoupling from the North. However, the evidence does not show the desynchronisation of cycles between developing and advanced economies, and deviations of economic activity from underlying trends continue to be highly correlated. A closer look suggests that the growth surge in developing economies owes more to exceptionally favourable international economic conditions than improvements in their underlying fundamentals.

* Yilmaz Akyuz is the chief economist of the South Centre. For further analysis see http://www.southcentre.org.

© Inter Press Service (2012) — All Rights Reserved. Original source: Inter Press Service