Most major economies are expected to continue to grow. But evidence is piling up that many are scrambling to maintain the gains they made last year.
European governments are dealing with debt and tighter budgets. The British economy barely budged at the start of the year. Even Europe's strongest economy, Germany, may face a slowdown.
High unemployment, suppressed real estate prices and expensive oil are slowing down the American economy, which managed to grow by 1,8 percent from January to March. After the earthquake and nuclear crisis, Japan slipped back into recession.
In China, interest rate hikes meant to rein in inflation are slowing growth.
The world economy will probably grow by only 3,5 percent this year, compared to 4,1 percent in 2010, estimates the research corporation IHS Global Insight. IHS previously assumed that growth would be around 3,8 percent.
Financial markets are reacting to indicators of a global slowdown. The Dow Jones index lost 400 points, or 3,2 percent, in May. Stocks fell three percent or more in Japan, Great Britain and Hong Kong in the same month.
The winds of the economy
Analysts say that "three headwinds" are hitting the world economy at the same time:
First, high oil prices (kerosene is now 50 percent more expensive than last year) push the prices of other goods. In rich countries, people refrain from spending, and in poor countries, expensive food hits the middle class and the poor hard.
Second, the reduction of budget spending. Many European countries had to cut spending after financial crises inflated their budget deficits.
Third, the earthquake and nuclear crisis in Japan disrupted production. The Japanese economy shrank by 3,7 percent in the first quarter and will likely fall by an additional 3,7 percent in the April-June quarter.
The biggest unknown lies in the consequences of the accident on the Japanese economy, said Bank of Japan Governor Masaki Shirikawa. Economists expect the Japanese economy to recover in the second half of the year.
Acceleration is also expected from the US economy. Higher employment will encourage people to spend more, and banks, freed from bad loans, will lend more.
China
However, there are more and more questions surrounding China. Four interest rate hikes since October have done little to cool China's inflation, which is now over five percent. Estimates of this year's Chinese growth were reduced to 9,4 percent, from 10 percent.
By raising interest rates and other measures to rein in bank loans, Beijing wants to reduce growth to seven percent this year to curb inflation. Some economists think that government controls mixed with power shortages and drought could push China into economic disaster, but most analysts expect China to tame inflation without severe consequences for the economy.
Other fast-growing countries, such as Brazil and Turkey, are also trying to slow growth to stem inflation.
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