During the dog
days of summer, a triple dip – three melting scoops of frozen goodness perched precariously
on a waffle cone – can be delicious. There are other kinds of triple dips that
are a lot less welcome, though. Just look at Italy.
Last week, the Italian
National Institute of Statistics released its preliminary estimate
of productivity in the third largest Eurozone economy. It showed Italy’s
economy contracted (again) during the second quarter of 2014. That puts Italy
firmly in triple-dip territory, according to The Washington Post:
“The greatest
trick the devil ever pulled was convincing Italy to join the euro. It hasn't
grown since. After its GDP fell 0.2 percent, Italy is stuck in a triple-dip
recession. Yes, triple: its economy started shrinking in 2008, relapsed
in 2011, and now again in 2014. Although, at this point, it's probably more
accurate to just call this a depression. After all, Italy's economy has
contracted 11 of the previous 12 quarters. It's been enough to wipe out almost
all its growth the past 14 years.”
Much of the rest
of Europe is faring somewhat better than Italy, but growth is not robust. Reuters reported Germany’s economy, the
largest in Europe, is expected to show stagnant growth during the second
quarter of 2014 as the crisis in Ukraine and sanctions on Russia take their
toll. German exports to Russia have fallen and German business leaders have
said tens of thousands of jobs may be at risk.
All eyes will be
on Europe during the next few weeks as second-quarter preliminary growth
numbers are released. Experts may have their fingers crossed, hoping the
unprecedented package of stimulus measures announced by the European Central
Bank (ECB) a couple of months ago will offset the negative effects of
geopolitical tensions. However, Bloomberg
opined that policy changes often take a while to make a difference. In the meantime,
European economies may be vulnerable to risks like
geopolitical unrest in Ukraine and the Middle East.
quick! what’s the fastest growing country
in latin america? Nope,
it’s not Brazil. The gross domestic product (GDP) growth forecast for Brazil was
lowered from 2.2 percent in January 2014 to 1.8 percent in June 2014, according
to The Economist. That means Brazil
is expected to grow more slowly than the United States this year.
It’s
not Peru, “a country that has enjoyed Asian-style growth averaging 6.4 percent
a year in 2003-13.” Peru’s growth has benefited from the country’s role as a
major producer of gold and copper. During 2014, Peru dropped to second place in
Latin America’s economic growth contest.
So,
who’s in first? Here are a few hints:
·
It’s
between Ecuador and Venezuela
·
It
has a coastline on both the Pacific Ocean and the Caribbean Sea
·
It’s
the second most bio diverse country in the world (In addition to having lots of
butterflies, orchids, and amphibians, it has more bird species than Europe and
North America combined.)
·
Americans
of a certain age may remember it as the epicenter of the 1980s war on drugs (Think
cartels and FARC guerillas.)
That’s
right. Colombia’s economy is expected to deliver the fastest growth in Latin
America during 2014 – and its vibrancy is unrelated to drugs. Like Peru, Colombia
is a beneficiary of the commodity lottery. Its main exports are oil and coal
whose prices have held up better than those of gold and copper in recent years.
In addition, The Economist reported
the country has benefitted from a variety of reforms and development efforts
including:
“A law in 2012 cut onerous payroll taxes
(while raising income tax on the better-off). The result is that formal-sector
jobs are growing at 8 percent a year, while the large informal sector has
started to shrink, which ought to boost productivity. Ambitious, albeit
delayed, private-public partnerships in roads and railways should see
investment of up to $25 billion by 2018.”
The
country’s leaders also implemented a fiscal rule that has reduced the
public-sector deficit to less than 1 percent of GDP.
Colombia’s
economic growth potential is mitigated by the risks of its ongoing civil
conflict. President Juan Manuel Santos was re-elected after campaigning on a
promise to negotiate peace with FARC guerillas.
Weekly Focus – Think About It
“Positive
anything is better than negative nothing.”
--Elbert Hubbard, American writer
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