Friday, February 3, 2012

>Global Scenarios is a quarterly analysis focusing on the outlook for the global economy. Read about the perspectives for and the most important risks to the global economy.

Global Scenarios
Chinese engine set to start pulling again

  • The global economy is expected to improve over the coming year as Chinese growth picks up
  • The US economy’s moderate recovery should continue
  • The euro recession is likely to be short, but growth prospects remain weak
  • Fading headwinds will lift Chinese growth
  • The euro debt crisis will continue. We expect a continued muddle-through scenario with high volatility but no break-up

 We expect 2012 to be a year of improvement for the global economy. Given current very downbeat sentiment, we believe this will be a positive surprise. The significant headwinds that derailed the recovery in 2011 have partly faded and some even become tailwinds.

 In particular, we expect the Chinese engine to start pulling again and join the US in driving the world economy forward. The euro area recession will likely be short and euro growth resume from Q2.

 That said, we look for growth rates in the western economies to remain subdued for a long time, whereas emerging markets are still expected to see solid growth.

 Downside risks are still predominant and mainly stemming from the euro debt crisis. We expect this crisis to be with us for a long time – and continue to see bouts of financial turmoil. However, we do not expect to see a collapse of the euro.

 Inflation is expected to fall sharply in 2012 due to lower commodity prices. This leaves room for policy to be eased further, not least in emerging markets.

To read the full report: GLOBAL SCENARIOS