As it embarks upon a new year, the world is exhibiting a remarkable dichotomy. Political insecurity plagues its leading countries, especially in Europe and America. Yet economic and business confidence is resilient, and expectations abound for another good year for economic growth, led by China and India, but with Europe, Japan and the US all making a contribution.
The real question is whether a new geo-political crisis – perhaps over Iran, or a spill-over of the conflict in Iraq to neighbouring countries – might yet undermine the cheerful mood in the world’s financial markets. But the relative ease with which the world economy survived last year’s spike in energy prices, without any dramatic consequences for inflation or growth in the big industrial economies, seems to reassure investors.
