Global Economic Crisis

Financial crisis:
When there is a loss of confidence in financial assets, investors around the world sell them at the
same time, which results in financial crisis. These assets will be worth a fraction of what they
were before. Financial institutions that own these assets may not have enough money to cover
them. This causes financial institutions not to lend to people because they have no liquidity.

The Global Job Crisis:

Global unemployment remains very high particularly among develop economies, with the
situation in Europe the most challenging. The unemployment rate continue to climb reaching a
record high of nearly 12 percent in the euro area during 2012, and increase of more than one
percentage point in this year.
If economic growth stays as anemic in develop countries as projected, employment rates will not
return to pre-crisis level until far beyond 2016.
Inflation:
Inflation rates remain subdued in most developed economies. Continue large output gaps and
downward pressure on wages in many countries are keeping inflationary expectations low.
Inflation in U.S. moderated over 2012 down to about 2 percent from 3.1 percent in 2011. A
further moderation in headline inflation is expected in the outlook for 2013. Core inflation,
which does not include price changes in volatile items such as energy, food, alcohol and tobacco,
has been much lower, at about 1.5 percent with no evidence of upward pressure.
Inflation receded in a majority of developing countries during 2012, but remains stubbornly high
in some. In the outlook anticipated increases in world food prices provoked by droughts in
various producer region, persistently high oil prices and some country specific supply side
constraints may continue to put some pressures on inflation in developing countries in 2013 and
into 2014.

International Trade and Commodity Prices:

Growth of world trade decelerated sharply for the 2nd year in a row, dropping from
12.6 percent in 2010 to 6.4 percent in 2011 and 3.2 percent in 2012. Feeble global
economic growth especially in Europe and other developed economies, is the
major factor behind the deceleration.