David Gray, Managing Partner, PwC Russia, comments on world economics review results

17.10.2013 "In a relatively quiet month, PwC`s Global Economy Watch (GEW) for October 2013 uses the upcoming meeting of policy makers from around the world which will take place in the Washington DC as a backdrop for a discussion on the state of the world economy. The GEW notes that there are a number of positive areas in the world economy, particularly in the more developed economies, which are showing continued signs of improvement in their economic performance. Even some of the most distressed developed economies such as Greece and Spain are showing increasing signs that they will actually emerge from prolonged recession in the near future. This trend is reflected in investment flows from hedge funds and other investors, who are starting to look at these markets, looking for a bounce in valuations, all be it from distressed levels. 

Although the October GEW was published too early to discuss it , the recent paralysis in the US government following the inability of politicians to agree on a deal around increasing the debt ceiling, is a disruptive factor that is having indirect effects outside the US. It is difficult to predict the final consequences, if any, of this event. There has even been speculation around the possibility of some form of default on US debt, but this remains highly unlikely. Nevertheless, such incidents contribute additional uncertainty to the market which disrupts investments decisions and increases risk premiums. Hopefully the impasse in the US will prove short-lived but it will undoubtedly continue to overshadow all international discussions about the world economy until it is resolved. 

Another interesting topic covered by the GEW relates to the modest rate of growth in employment around the world and the associated continued high unemployment levels in most developed markets. As the GEW highlights. Russia`s issue is not a lack of jobs as it has high employment. In fact the lack of free resources in the labour market in Russia is in fact an issue, with unemplyment close to historic lows. The high level of employment in state enterprises and the public sector limits the availability of labour for more innovative and faster growing sectors, reducing the countries ability to realise productivity gains that are essential to Russia's international competitiveness"

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