Winnipeg Free Press - PRINT EDITION

Tough times overseas hit home

Economies in Asia, Europe -- and Manitoba -- take a beating

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OTTAWA -- Just six days into the new year, the headlines were already gloomy.

Europe's debt crisis sparks fresh jitters screamed one newspaper on Jan. 6, 2012.

By the end of the month, the International Monetary Fund was slashing its global economic forecast. Japan posted its first trade deficit in 30 years.

In February, there was some reason for optimism. The United States economic recovery showed signs of life, which was good news for Canadian exporters. A second bailout was finalized to save Greece's economy from a complete meltdown.

Then came March, which blew in like a lion with fresh worries about a slowdown in China and Europe's debt crisis.

And on and on it went.

For the sheer volume of stories and the effect on so many people's lives, Free Press editors chose the global economy as the international story of the year.

Derek Burleton, deputy chief economist at TD Economics, said the best way to describe the global economy in recent years is as a pendulum.

"It's been swinging back and forth for a couple of years now," he said.

The economy in 2012, for the most part, played out the way most expected, Burleton said.

The first half of the year saw better-than-expected growth, particularly in the U.S., where the housing market and auto sectors gained steam. But that was offset by a slower-than-expected second half of the year.

While most predicted continued economic turmoil in Europe, even some of the world's fastest-growing economies slowed in 2013. China had its slowest growth in more than a decade, affected mainly by government controls implemented to slow down an economy that was too hot, causing high inflation rates. The changes pushed the housing market into a tailspin.

India was expected to see economic growth slow to around 5.5 per cent this year, the lowest since 2004. Russia's growth figures were pushed downward by more than a point.

The economic woes led to political upheaval as well. France, Italy and Greece elected new governments, largely based on voters' concerns about austerity measures and economic uncertainty. Spain ousted its government in late 2011. It didn't seem to help. As unemployment rose and mortgage foreclosures soared in Italy, Greece and Spain, people took to the streets this fall, objecting to austerity measures with mass marches and general strikes. Youth unemployment in Spain and Greece is higher than 50 per cent.

In Canada, it was also an up-and-down year. Global commodity prices are still lower than Canada would like, eating into revenues and forcing the federal government to go deeper into the red than it promised during last spring's budget.

Finance Minister Jim Flaherty expects to post a deficit of $26 billion this year, $5 billion more than he forecast last spring, and won't be able to balance the budget until 2016.

Burleton said the Canadian economy has limped along mainly on the backs of consumer spending and housing. Both those areas are cooling, thanks to tighter government controls on mortgages and repeated warnings by Bank of Canada governor Mark Carney about the size of household debt. So Canada's growth this year will be more dependent on outside forces than in recent years.

"Canada's sustained expansion is going to depend more on what happens in the U.S," Burleton said. "We're ending the year on a soft patch."

In Manitoba, the NDP government was forced to push back its balanced-budget pledge until 2016, meaning the province will be in the red longer than any province except Ontario.

Fletcher Baragar, economics professor at the University of Manitoba, said Canada and Manitoba are somewhat luckier than most of the global economies. But both are still vulnerable, mainly to fortunes in the U.S.

With the fiscal cliff looming south of the border, Canada's and Manitoba's exports are on their own cliff, waiting to see if their biggest trading partner tosses itself a lifeline.

Baragar said it is correct to describe the public's attitude toward the economy at this point as both wary and weary.

"It is worrisome. The crisis broke out in 2008 and hit us with a bang, and here we are four or five years later, and this really strong, robust recovery hasn't happened," he said. "I wouldn't really say people are expecting the good times to come back with the new year."

MONEY makes the world go round, or so the saying goes.

But when there's not enough to go around, the world starts to teeter.

And, wobbly global finances that send economies into a tailspin have become a fact of life that we seem unable to shake.

From protests in the streets of Europe to the fall of governments to the narrative of the U.S. presidential election to impacting the bottom line of not only Manitoba but also Manitobans, the economic reality show was one that generated plenty of drama and far more losers than winners.

The only thing certain about the uncertain global economy was its ability to generate far-reaching headlines, and that makes it the Free Press international story of the year.


-- Paul Samyn, editor

THIS is the Free Press choice for international story of the year. What is your choice? Please send your opinion to, with "story of year" in the slug line. We will publish a selection of opinions later this week.

Republished from the Winnipeg Free Press print edition December 28, 2012 B1

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