By Graeme Davies

The year just finishing was one of terrific challenges for both the global and the local economy as growth became increasingly erratic in the UK and Europe and the recent drivers of global recovery, the emerging markets of India, China, Brazil and Russia, showed signs of spluttering too.

The local economy was beset by diverse challenges, from acts of god, such as a fiercely cold winter with heavy snows followed by one of the wettest spring and summer seasons on record, to man-made disasters, such as the continued downward spiral of the eurozone economy.

The eurozone created a bleak backdrop throughout the year as it lurched from one crisis to another with the debt burden on periphery countries such as Greece, Spain and Italy beginning to drag on the performance of the core countries of Germany and France. The fact the eurozone is the Wales’s biggest single trading partner produced a significant knock-on effect.

But mid-way through the year the European Central Bank stepped in with a hefty bond buying programme, which began to stabilise the economic bloc. Greece renegotiated its debts, Spain recapitalised its banks and some confidence began to creep back in. Europe remains in the doldrums, but at least it appears to be out of intensive care.

Elsewhere, the US economy picked up but only slowly as the Federal Reserve continued to pump huge sums of money into the economy through its quantitative easing programme, which it has indicated will continue until unemployment starts to come down significantly.

As the developed world struggled, the effect on the former powerhouses of the global economy was also marked.  Growth in India and China slowed from its previously high rates. India was hit by stubbornly high inflation. In China, the authorities acted in an attempt to cool the economy and avoid the nasty effect of a property bubble bursting.

With such difficult conditions, in both the local and wider global economies, many sectors suffered. Close to home, exporters to the eurozone have been hit; indeed Welsh exports to the economic bloc fell from 43 per cent of the total to 40 per cent in the first six months of 2012, although the total value of exports edged up by 0.6 per cent.

Overall, the Welsh economy remained hampered by weak output with the index of production down by 1.5 per cent, year on year, at the end of the second quarter, but this was a better performance than the overall UK economy.

The Welsh construction and manufacturing sectors saw falls in output of 8.4 per cent and 3.3 per cent respectively. But, within these sectors, some sub-sectors have continued to hold up well. The commercial aviation industry and its associated supply chain has benefited from the structural growth in emerging markets in Asia, Africa and Latin America and manufacturers of products for the global energy industries, whether it be resources extraction or energy generation, have also continued to find demand for their products.

But, for the most part, 2012 has been a year of consolidation and survival for most companies as the austerity policies in the UK and eurozone have combined to dampen demand from both the public and private sectors. And, for many, 2013 is going to be equally tough, especially in the opening half of the year after which things may pick up slowly at home and abroad.

The need for Welsh businesses to be attuned to international opportunities is going to be even greater than ever.