Recent research from Deloitte reveals that the global economy is being shaped by a "new reality," fueled by big, emerging countries, rather than the established, well-developed players that have dominated the business landscape in the past.
For example, the report points out that:
In the United States, the public sector's troubled balance sheets, a weak job market, rising energy costs, and declining home prices still represent formidable challenges for policymakers.
Authorities in China face challenges as the country enters a new era of economic development. They must balance inflation, export competitiveness and the longer-term effects of China's excessive dependence on investment for growth.
While overall prospects in the Eurozone area are improving, peripheral nations continue to struggle. Regulatory efforts, budgetary consolidation, banking supervision, and financial sector oversight could go a long way to address the imbalances.
In Japan, recent economic growth was strong, but the end of government incentives and a decline in nominal wages does not bode well for consumer spending. Japan's export sector also faces headwinds due to waning demand and increased competition from other Asia Pacific producers.
The outlook for India is upbeat for the most part. While policymakers continue to struggle with inflation, the manufacturing sector is forging ahead on the back of strong domestic demand and exports.
The United Kingdom is recording surprisingly strong growth in light of expansive monetary policy, strong export demand, a weak pound, and increased business investment. The question is whether the private sector will compensate for fiscal tightening in the public sector.
In Brazil, inflation is higher than desirable, but tightening monetary policy could place upward pressure on the country's currency, thereby hurting export competitiveness. Long-term fiscal consolidation will be critical to ensuring growth as well as boosting investment and exports.
In Russia, fostering a sustainable recovery will involve moving away from an excessive dependence on commodities. While higher energy prices may help in the short term, long-term growth will depend on stimulating investment in non-commodity industries and utilizing the abundance of highly-skilled labor.
In Sub-Saharan Africa, economic activity is heating up. The rise of big emerging markets has stimulated demand for commodities that are in abundance in Africa. While critical infrastructure problems remain, growth-oriented policies and structural changes in governance will set the stage for steady growth.
"As developed markets struggle to recover, big emerging countries are racing aheadnot only boosting their own living standards, but stimulating growth in the rest of the world," Ira Kalish, Director of Global Economics, Deloitte Research, part of Deloitte Services LP in the United States, said. "With more rapid growth than the developed world, these countries have become significant players in the global economy. For the first time, their policies are of critical importance to everyone else."
The full report is available at www.deloitte.com/economicoutlook.