Global Economy Hits Turning Point

The World Bank has announced this week that the global economy is at a “turning point” in the face of stronger global growth forecasted for 2014. What does this mean for the industry of business acquisition?

RTA Business has learned that this week the World Bank, the overarching global banking regulator, released a report on the state of the global economy. Specifically it highlighted forecasts stating that richer countries are “turning a corner” in the wake of the damage caused by the financial crisis.

This is expected to have a knock on effect on developing economies, as strengthening western finances should facilitate stronger investment.

However the World Bank warned that growth prospects in such economies “remained vulnerable“ to the expected ramifications of the withdrawal of the economic stimulus package by the US Federal Reserve.

The stimulus package was a programme set in place by the US Federal Reserve to shore up the country’s economy in wake of the 2008 financial crisis. It involved bond-buying and aided in the development of emerging economies such as India and Brazil.

However, stronger US job growth saw months of speculation on when the scheme would be tapered back; this had ramifications on markets across the world. Now the Reserve has started scaling back its monthly bond-buying scheme, which was formerly set at $85bn (£52bn) a month. This has caused fears that it could see global interest rates rise, which could alter the flow of money in and out of emerging markets.

In an article for the BBC World Bank group president Jim Yong Kim commented on the affects this could have. He commented that "growth appears to be strengthening in both high-income and developing countries, but downside risks continue to threaten the global economic recovery."

He elaborated on this, saying that "the performance of advanced economies is gaining momentum, and this should support stronger growth in developing countries in the months ahead. Still, to accelerate poverty reduction, developing nations will need to adopt structural reforms that promote job creation, strengthen financial systems, and shore up social safety nets."

So what does this mean for the industry of business acquisition? A strengthening economy naturally means that more people will be willing to sell their businesses as prices rise. This will lead to a stronger, more robust market. These suggestions, if governments decide to set them into place, could also foster a more beneficial environment for business acquisition.

What has been clear for a while is that the world is moving out of the Great Recession and into sustained recovery. However in order to sustain this recovery we need to be cautious.