Imbalance in the world economy
-Dr.Debesh Bhowmik
The growing imbalance in the world economy has quicken the
international liquidity shortage and the root cause of financial crisis too
although macro-economic imbalance especially saving –investment imbalance is to
be treated as fundamental one.Former is considered in case of external balance
and later is treated in internal balance of the economy.Consider in the
following table where we find that US current account deficit has been rising
up to 2006 , then started to decline till 2009 and then rising continuously.Only
US economy occupied the largest share of the deficit in current account balance
followed by advanced economies,Latin America and Caribbeans and Central and
Eastern Europe respectively.The projection of deficit up to 2017 is upward.But
this deficit current account balance has offset by surplus balances which have
acquired by Euro Area,Japan,some advanced countries,newly industrialised Asian
economies,developing Asia and Middle East and North Africa respectively.Surplus
is stipulating in Euro Area since 2009 but Japan’s surplus is more or less
volatile.Asian economy has been facing upward surplus balance in current
account. But,the gap is rising .And the world current account surplus balance
has been increasing till 2011 and projected falling up to 2017. The largest surplus is dominated by EU and
Asian economies followed by Japan.Therefore, the Asian and European surplus
have been utilized as capital outflows to US and Latin American and as well as
other deficit countries.So it is not wise to think that Euro crisis would
damage European economy with a collapse of euro or on the contrary revival of
US financial crisis would come out from chronic deficit and the huge dollar
liability from abroad so that the world economy may reach at stability in monetary
and fiscal situation to meet up the shortage of international liquidity.
Table: World current account balance(in billion US.dollars)
