Hypo Venture Capital Headlines: Outlook for global economy in 2012
FOR IMMEDIATE RELEASE
new york city, New York, United States of America (Free-Press-Release.com) February 6, 2012 -- We expect 2012 to be a year of slowing global growth, with wide divergences between regions and countries. Overall global growth will slow from about 3% in 2011 to 2.5% in 2012. For 2013, a modest recovery in global growth is likely.The Euro-zone sovereign debt crisis will escalate, provoking a sufficiently strong policy response from the European Central Bank (ECB) and creditor governments to prevent Euro-zone disintegration and a string of disorderly sovereign debt defaults. Even so, sovereign spreads will remain unusually wide even at end-2012. The euro area already probably is falling back into recession, with negative quarter-over-quarter growth in fourth quarter of 2011 likely to carry over into 2012. Real GDP in the euro area will drop by at least 1% in 2012.
The United Kingdom is likely to be near recession, and we also look for a marked slowdown in Eastern Europe in 2012. By contrast, modest but sustained growth will occur in the United States in 2012 and beyond, and still relatively strong but slowing growth will take place in 2012 in emerging Asia, Latin America, Africa and the Middle East. In all, there will be sluggish growth in the advanced economies (around 1% yearover-year in 2012), with emerging market growth of about 5% for 2012.As a result, the extent to which global growth is China-dependent will increase. The lagged effect of past domestic tightening and slowing export growth are likely to cool China’s growth below 9% in 2012. Nevertheless, China will continue to account for a huge share of global growth.
The specific predictions for 2012 could be summarised as follows.The US will avoid a recession: The US domestic risks have diminished somewhat and growth momentum has picked up modestly. After a fairly miserable first half of the year, the economy grew by 2% in the third quarter and is likely to ac¬celerate to more than 3% growth in the final quarter of 2011. There are a number of signs that recent momentum could carry into next year – job openings are on the rise, the unemploy¬ment rate is trending down and corporate profits relative to GDP are at their highest level in over six decades.
Recession in the Euro-zone: The Euro-zone sovereign debt and banking crisis will intensify further in 2012, with sovereign yield spreads vs German Bunds remaining high in many Euro-zone countries, and many countries in the euro-zone in recession. We do not, however, expect the euro area to break up in 2012 or the following years, nor do we expect the disorderly default of an euro-zone country. The risk that either or both of these disaster scenarios materialise is, however, non-negligible at around 25%.Asian growth will continue: While Asia will not remain immune to a recession in the Euro-zone, growth in the region will continue to be the strongest in the world for a number of reasons. First, Japan’s post-earthquake rebound will help to underpin the region’s exports, offsetting some of the weakness in sales to Europe. Second, Chinese economic growth will be around 8% and further bolster Asian growth prospects. Third, easing inflation will give all Asian governments much leeway to stimulate, if necessary.
Growth in emerging markets will continue: The Euro-zone crisis will have an adverse impact on emerging European countries as Western Europe is its most important export destination and also because the region is dominated by subsidiaries of Western European banks — all of which are tightening credit. Latin America and Africa are relatively more vulnerable to the United States and China so, barring a plunge in commodity prices, the growth in these regions should be reasonable.Inflation will drop worldwide: With soft world growth and drop in commodity prices, inflation is likely to decline worldwide in 2012. The decline will be more pronounced in the developed countries due to the excess capacity in the labour and product markets. The drop in food prices in recent months will also keep inflation under control in the emerging markets.
