Five years after a global financial crisis erupted, the world’s biggest economies still need to be propped up.
They’re growing and hiring a little faster and creating more jobs, but only with extraordinary aid from central banks or government spending. And economists say major countries may need help for years more.
Central banks are pumping cash into economies and keeping loan rates near record lows. Even fast-growing China has rebounded from an uncharacteristic slump with the help of government money that’s poured into projects and made loans easily available from state-owned banks.
For now, thanks in part to the intervention, the world economy is improving. The International Monetary Fund expects global growth to rise to 3.6 percent in 2014 from 2.9 percent this year.
Here’s a look at how the world’s major economies are faring:
United States
The U.S. economy grew at a 2.8 percent annual pace from July through September, though consumers and businesses slowed their spending. U.S. employers added 204,000 jobs in October.
The Fed has been debating whether hiring is healthy enough to justify slowing its monthly bond purchases.
Even at reduced levels, the bond purchases would continue to stimulate the economy by adding money to the financial system and lowering loan rates to encourage borrowing and spending. The Fed’s purchases have helped offset U.S. government spending cuts.
But weaning the U.S. economy off Fed support is “tricky … If you do it too slowly, you could ignite inflation. If you do it too quickly, you run the risk of killing the recovery,” according to Nariman Behravesh, chief economist at IHS Global Insight.
Europe
The 17 countries that use the euro currency are expected to eke out their second-straight quarter of growth from July through September. Many economists, however, say the eurozone’s growth might not meet even the feeble 0.3 percent quarterly pace achieved from April through June.
The European Central Bank surprised investors last week by cutting its benchmark refinancing rate to a record 0.25 percent. It acted after economic reports exposed the weakness of the recovery.
The rate cut “signals that the ECB is not prepared to accept the risk that the euro area falls into deflation,” says Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics.
Japan
Japan’s economic recovery has gained momentum since Prime Minister Shinzo Abe took office in late 2012. Under “Abenomics,” the government and central bank have injected money into the economy through stimulus spending and rate cutting. The economy grew at a robust 3.8 percent annual rate from April through June.
But economists worry about whether the recovery can be sustained and whether Japan can grow enough to make up in tax revenue what it’s spending on stimulus.
Like the Fed, the Bank of Japan could struggle with how to time and carry out a reversal of its easy money policy once the economy improves or if inflation or asset bubbles emerge as a threat.
China
China’s economy grew at a two-decade low of 7.5 percent in the three months that ended in June, compared with a year earlier. That’s still a vigorous pace compared with the developed economies of Europe, the United States and Japan. But for China, it marked a slowdown, and Beijing launched a mini-stimulus program, spending on railway construction and other public works.
It worked: Growth edged up to 7.8 percent from July through September from a year earlier.
Yet some economists doubt the gains in China will last.
“I can’t see the rebound lasting for very much longer, because it has been driven by government projects,” says Mark Williams of Capital Economics.
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