EIU Global Forecast May 2012
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EIU Global Forecast May 2012

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  • The euro zone is forecast to underperform the US in 2009 as it suffers from a massive drop in external demand, the impact of the global financial crisis and the unwinding of domestic imbalances. The US recovery will be driven partly by aggressive fiscal stimulus which will make itself felt from the second half of 2009 and some restocking, after the extensive drawdown of inventories in the first half 2009.
  • The euro zone is forecast to underperform the US in 2009, largely reflecting the severe weakness of Germany, which, like Japan, remains highly exposed to the global trade cycle. The US recovery will be driven partly by aggressive fiscal stimulus, which will make itself felt from the second half of 2009.
  • The euro zone is forecast to underperform the US in 2009, largely reflecting the severe weakness of Germany, which, like Japan, remains highly exposed to the global trade cycle. The US recovery will be driven partly by aggressive fiscal stimulus, which will make itself felt from the second half of 2009.
  • Although we are forecasting steady growth in oil demand in 2011-13, ample supply and capacity will prevent significant price gains. While our forecast suggests markedly lower prices in 2009-13 than in 2008, they are still relatively high in both historical and real terms.
  • Policy rates in the largest industrial economies are forecast to remain at ultra-loose levels at least until the end of 2010. Concerns not to inflate fresh bubbles will persuade the Federal Reserve (the US central bank) to start to tighten policy from 2011.

EIU Global Forecast May 2012 EIU Global Forecast May 2012 Presentation Transcript

  • Global forecasting serviceEconomic forecast summary - May 2012 Master Template 1 www.gfs.eiu.com
  • We have raised our forecast for real GDPgrowth in 2012 to 2.2% from 1.9%. USeconomic figures this year have beenreasonably strong, especially on theconsumer spending front.Serious headwinds remain, and ouroutlook is still cautious. Job creationslowed in March, and income growth oflate has been negative in real terms.Housing market data has improvedrecently but a large overhang of unsoldhouses remains a drag on the propertymarket.A drastic tightening of fiscal policy is inprospect in 2013 for the incomingadministration.
  • The euro zone debt crisis has returnedas the effects of the ECB’s recentliquidity injections fade. Spain’s fiscalmisjudgements sent bond yieldssoaring in late March and April. Yieldsalso rose in Italy, but at a slower pace.As in 2011, the authorities will struggleto keep sovereign funding costs atsustainable levels We expect the eurozone to survive, but anticipate muchturmoil in 2012. The EU’s bail-outfunds, at present, are not large enoughto accommodate Spain.We expect euro zone GDP to contractby 0.7% in 2012. Germany will farebest; Greece, Portugal and Spain worst.
  • The economy contracted by 0.7% in2011, undermined by the negative impactof the March earthquake and tsunami aswell as a strong yen that constrainedexport potential.A recovery in Japans automotive sector—after the disruption caused by thenatural disasters and flooding later in theyear in Thailand—will support bothindustrial output and exports.The economy is expected to grow by1.5% in 2012, supported by a strongerexport performance and reconstructionactivity. From 2013 we expect theeconomy to grow at a rate of between1-1.5%, a downgrade from priorforecasts.
  • Growth in 2012 will be constrained bysluggish OECD demand. EMs will stillcomfortably outperform their peers inthe developed world in 2012-16.EM currencies will be sensitive to the“risk-on”, “risk-off” trade, rallying wheninvestors are more tolerant of risk andfalling back when investors flock to theUS dollar.We have raised our China 2012 GDPforecast to 8.3% from 8.2%, higherthan the government’s new medium-term target of 7.5%. Rebalancing theeconomy away from investmenttowards private spending will make forless commodity-intensive growth.
  • Oil consumption growth will beconstrained in 2012 by the weakOECD economic outlook. It willaverage nearly 2% year on year in2013-16, led by rising demand in thedeveloping world.Geopolitical risks are weighing on thesupply picture particularly thetensions between the West and Iran.Our forecast assumes a militaryoutcome is avoided.Prices will average around US$115/bin 2012 as supply concerns offset thenegative impact of weaker demand.
  • Consumption growth is expected toslow in 2012, constrained by weak EUand growth and somewhat slowergrowth in the developing world.However, rising emerging marketincomes and urbanisation will underpinmedium-term demand growth.Years of underinvestment, particularlyin agriculture, will support prices.Nominal prices will remain historicallyhigh in 2012-16, but prices will easeback in real terms.
  • Sluggish demand will be deflationarybut high oil prices will push upheadline inflation in coming months.The Fed has said it will keep interestrates very low until late 2014. Afurther round of quantitative easingappears unlikely if the US economygrows at a reasonable pace.The ECB cut its policy rate twice in2011 as the regional economic crisisworsened. We expect the ECB tohold its policy rate steady at 1% in2012.Most emerging market central bankswill keep interest rates broadly stablein 2012.
  • The return of Europe’s debt crisis willkeep the euro under pressure. Weexpect an average 2012 rate ofUS$1.31:€1 vs US$1.39:€1 in 2011.The yen has weakened since the startof the year as risk appetite hasrecovered somewhat and the Bank ofJapan has become more aggressive ineasing monetary policy.EM currencies will be supported overthe medium term by positive growth andinterest rate differentials with OECDeconomies.China’s decision to allow the renminbito move in a wider trading ban willincrease volatility.
  • + Unprecedented policy response after Greek exit prevents contagion 16- An attack on Iran results in an oil price shock 15- The global economy falls into recession 15- The euro zone breaks up 15+ Stronger than anticipated US growth boosts the global economy 12
  • - Tensions over currency manipulation lead to protectionism 12- The Chinese economy crashes 10- US dollar crashes 10- Economic upheaval leads to widespread social and political unrest 9- Resumption of monetary stimulus leads to new asset bubbles 8
  • Access analysis on over 200 countries worldwide with the Economist Intelligence Unit The analysis and content in our reports is derived from our extensive economic, financial, political and business risk analysis of over 203 countries worldwide. You may gain access to this information by signing up, free of charge, at www.eiu.com Click on the country name to go straight to the latest analysis of that country: Further reports are available from Economist Intelligence Unit and can be downloaded at www.eiu.com G8 Countries * Canada * Germany * Japan * United Kingdom * France * Italy * Russia * United States of America BRIC Countries * Brazil * Russia * India * China CIVETS Countries * Colombia * Vietnam * Turkey * Indonesia * Egypt * South Africa Or view the list of all the countries. Should you wish to speak to a sales representative please telephone us: Americas: +1 212 698 9717 Asia: +852 2585 3888 Europe, Middle East & Africa: +44 (0)20 7576 8181 www.gfs.eiu.com
  • Access analysis and forecasting of major industries with the Economist Intelligence Unit In addition to the extensive country coverage the Economist Intelligence Unit provides each month industry and commodities information is also available. The key industry sectors we cover are listed below with links to more information on each of them. Automotive Analysis and five-year forecast for the automotive industry throughout the world providing detail on a country by country basis Commodities This service offers analysis for 25 leading commodities. It delivers price forecasts for the next two years with forecasts of factors influencing prices such as production, consumption and stock levels. Analysis and forecasts are split by the two main commodity types: “Industrial raw materials” and “Food, feedstuffs and beverages”. Consumer goods Analysis and five-year forecast for the consumer goods and retail industry throughout the world providing detail on a country by country basis Energy Analysis and five-year forecast for the energy industries throughout the world providing detail on a country by country basis Financial services Analysis and five-year forecast for the financial services industry throughout the world providing detail on a country by country basis Healthcare Analysis and five-year forecast for the healthcare industry throughout the world providing detail on a country by country basis Technology Analysis and five-year forecast for the technology industry throughout the world providing detail on a country by country basis www.gfs.eiu.com
  • Media Enquiries for the Economist Intelligence Unit Europe, Middle East & Africa Asia Grayling PR The Consultancy Jennifer Cole Tom Engel +852 3114 6337 / +852 9577 7106 Tel: + 44 (0)20 7592 7933 tengel@consultancy-pr.com.hk Sophie Kriefman Ian Fok Tel: +44 (0)20 7592 7924 +852 3114 6335 / +852 9348 4484 Ravi Sunnak ifok@consultancy-pr.com.hk Tel : +44 (0)207 592 7927 Rhonda Taylor +852 3114 6335 Mobile: + 44 (0)7515 974 786 rtaylor@consultancy-pr.com.hk Email: allgraylingukeiu@grayling.com Americas Australia and New Zealand Grayling New York Cape Public Relations Ivette Almeida Telephone: (02) 8218 2190 Tel: +(1) 917-302-9946 Sara Crowe Ivette.almeida@grayling.com M: 0437 161916 sara@capepublicrelations.com Katarina Wenk-Bodenmiller Luke Roberts Tel: +(1) 646-284-9417 M: 0422 855 930 Katarina.Wenk-Bodenmiller@grayling.com luke@capepublicrelations.com www.gfs.eiu.com