Here I review the forecasts of two authorities on global economic affairs, IHS and the IMF. This is summary for the IHS (2011):
“If Europe only suffers through a mild recession and China does not experience a hard landing, then world real GDP growth will slow from 4.2% in 2010 and 3.0% in 2011 to around 2.7% in 2012. On the other hand, if the recession in Europe is much deeper and/or the slowdown in China more pronounced, then the global economy will be headed for much weaker growth and possibly another recession.”
They are fairly optimistic about the USA, predicting growth of 2%, as well as projecting growth of 7.5-8% in China
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The IMF (2011) predicted global growth of about 4% in 2012, down from “over 5% in 2010”. They were less optimistic about the USA, warning that a political impasse over fiscal consolidation, a weak housing market, a rapid increase in household saving rates or deteriorating financial conditions could. The optimism of the IHS report is due to the fact that some of these factors have started to look up between the months of publication between the two forecasts (September for the IMF, December for IHS).
Despite the relative overall optimism, caution is due. Much depends on the response of the USA and China to a likely European recession. Much of the demand contributing to the apparent recovery of the past few years has been created by the public sector. We have yet to see the precise impacts of fiscal tightening, and the only way we can continue along the current trajectory is if the economic activity stimulated by the public sector successfully transfers to the private sector. As yet it remains unclear whether this will happen.
“If Europe only suffers through a mild recession and China does not experience a hard landing, then world real GDP growth will slow from 4.2% in 2010 and 3.0% in 2011 to around 2.7% in 2012. On the other hand, if the recession in Europe is much deeper and/or the slowdown in China more pronounced, then the global economy will be headed for much weaker growth and possibly another recession.”
They are fairly optimistic about the USA, predicting growth of 2%, as well as projecting growth of 7.5-8% in China
.
The IMF (2011) predicted global growth of about 4% in 2012, down from “over 5% in 2010”. They were less optimistic about the USA, warning that a political impasse over fiscal consolidation, a weak housing market, a rapid increase in household saving rates or deteriorating financial conditions could. The optimism of the IHS report is due to the fact that some of these factors have started to look up between the months of publication between the two forecasts (September for the IMF, December for IHS).
Despite the relative overall optimism, caution is due. Much depends on the response of the USA and China to a likely European recession. Much of the demand contributing to the apparent recovery of the past few years has been created by the public sector. We have yet to see the precise impacts of fiscal tightening, and the only way we can continue along the current trajectory is if the economic activity stimulated by the public sector successfully transfers to the private sector. As yet it remains unclear whether this will happen.
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