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EIU Global Forecast April 2012
The global economic outlook remains modest. While the US job market has strengthened and the eurozone crisis has been averted, growth remains constrained by high oil prices, fiscal tightening, and sluggish demand. The EIU forecasts US GDP growth of 1.9% in 2012 and contraction of 0.7% in the eurozone. Housing markets are improving but remain a drag. Emerging markets will continue to outperform developed economies. Geopolitical risks pose challenges to oil supply and prices. Central banks aim to keep rates low but further stimulus appears unlikely if jobs growth continues.
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EIU Global Forecast April 2012
- 1. Global forecasting service Economicforecast summary - April 2012 Master Template 1 www.gfs.eiu.com
- 2. The economy hascreated an average of 240,000 jobs a month in the past three months, pushing down the unemployment rate to 8.2%. The tone of recent data has been robust. But income growth remains sluggish and high oil prices are cutting disposable income. We have edged up our 2012 GDP growth forecast to 1.9%. Housing market data has improved recently but a large overhang of unsold houses remains a headwind for the property market. A drastic tightening of fiscal policy is in prospect in 2013 for the incoming administration.
- 3. The injection ofliquidity by the ECB into euro zone banking system has eased funding pressures on banks and sovereigns, notably Italy and Spain. In Greece a restructuring of debt owed to private creditors was completed in March, entailing write-offs of €100bn. The debt restructuring and additional austerity measures have paved the way for a second, €130bn EU/IMF loan deal. This has averted the risk that Greece might default on a €14.5bn bond repayment in March. We expect the euro zone economy to contract by 0.7% in 2012.
- 4. Growth in 2011was undermined by the negative impact of the March earthquake and tsunami as well as a strong yen that constrained export potential. The economy lost momentum in the fourth quarter, contracting by 0.6%, but one positive development was strong growth in investment by Japanese companies. The economy is expected to grow by 1.5% in 2012 supported by a stronger export performance and reconstruction activity. From 2013 we expect the economy to grow at a rate of between 1-2%.
- 5. Growth in 2012will be constrained by sluggish OECD demand. EMs will still comfortably outperform their peers in the developed world in 2012-16. EM currencies and asset markets have rallied strongly since the start of the year as risk appetite has recovered. Brazil has taken measures to stem upward pressure on the Real. In China we forecast growth of 8.2%, higher than the government’s new, lowered medium-term target of 7.5%. Rebalancing the economy away from investment towards private consumption will make for less commodity-intensive growth.
- 6. Oil consumption growthwill be constrained in 2012 by the weak OECD economic outlook. It will average nearly 2% year on year in 2013-16, led by rising demand in the developing world. Geopolitical risks are weighing on the supply picture particularly the tensions between the West and Iran. Our forecast assumes a military outcome is avoided. Prices will average around US$110/b in 2012 as supply concerns offset the negative impact of weaker demand.
- 7. Consumption growth isexpected to slow in 2012, constrained by weak EU and growth and somewhat slower growth in the developing world. However, rising emerging market incomes and urbanisation will underpin medium-term demand growth. Years of underinvestment, particularly in agriculture, will support prices. Nominal prices will remain historically high in 2012-16, but prices will ease back in real terms.
- 8. Sluggish demand willbe deflationary but high oil prices will push up headline inflation. The Fed has signalled its intention to keep interest rates very low until late 2014. A further round of quantitative easing appears unlikely if the current rate of job creation is sustained. The ECB cut rates twice in late 2011, reversing the two rate rises earlier in the year. In 2012 we expect the ECB to keep its policy rate at 1%. We expect most emerging market central banks to keep interest rates broadly stable in 2012.
- 9. As funding stresseson euro zone banks and sovereigns have eased, the euro has rebounded. Having bounced from a recent low of US$1.26, the single currency appears to be establishing a new trading range above US$1.30:€. The yen has weakened as risk appetite has recovered and the Bank of Japan has become more aggressive in easing monetary policy. EM currencies have rebounded. Over the medium term they will be supported by positive growth and interest rate differentials with OECD economies.
- 10. + Unprecedented policyresponse 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
- 11. - Tensions overcurrency 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
- 13. Access analysis onover 200 countries worldwide with the Economist Intelligence Unit The analysis and content in our reports is d erived from our extensive econom ic, financial, political and business risk analysis of over 203 countries world wid e. You m ay gain access to this inform ation by signing up, free of charge, at www.eiu.com C lick on the country nam e to go straight to the latest analysis of that country: able from Econom ist Intelligence Unit and can be d ownl ed at www.eiu.com Further reports are avail oad 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 O r view the list of all the countries. Should you wish to speak to a sales representative please telephone us: Am ericas: + 1 21 2 698 971 7 Asia: + 852 2585 3888 Europe, M id d le East & Africa: + 44 (0)20 7576 81 81 Master Template 13 www.gfs.eiu.com
- 14. Access analysis andforecasting of major industries with the Economist Intelligence Unit In ad d ition to the extensive country coverage the Econom ist Intelligence Unit provid es each m onth ind ustry and com m od ities inform ation is also available. The key ind ustry sectors we cover are l isted bel with links to m ore inform ation on each of them . ow Automotive Analysis and five-year forecast for the autom otive ind ustry throughout the world provid ing d etail on a country by country basis Commodities This service offers analysis for 25 l ing com m od ities. It d elivers price forecasts for the next two years with forecasts of factors ead influencing prices such as prod uction, consum ption and stock l evels. Analysis and forecasts are split by the two m ain com m od ity types: “Ind ustrial raw m aterials” and “Food , feed stuffs and beverages”. Consumer goods Analysis and five-year forecast for the consum er good s and retail ind ustry throughout the world provid ing d etail on a country by country basis Energy Anal ysis and five-year forecast for the energy ind ustries throughout the world provid ing d etail on a country by country basis Financial services Analysis and five-year forecast for the financial services ind ustry throughout the world provid ing d etail on a country by country basis Healthcare Anal ysis and five-year forecast for the healthcare ind ustry throughout the world provid ing d etail on a country by country basis Technology Anal ysis and five-year forecast for the technol ogy ind ustry throughout the world provid ing d etail on a country by country basis Master Template 14 www.gfs.eiu.com
- 15. Media Enquiries forthe Economist Intelligence Unit Europe, Middle East & Africa Asia Grayling PR The Consultancy Jennifer C ole Tom Engel + 852 31 1 4 6337 / + 852 9577 71 06 Tel: + 44 (0)20 7592 7933 tengel@consultancy-pr.com.hk Sophie Kriefm an Ian Fok Tel: + 44 (0)20 7592 7924 + 852 31 1 4 6335 / + 852 9348 4484 Ravi Sunnak ifok@consultancy-pr.com.hk Tel : + 44 (0)207 592 7927 Rhond a Taylor + 852 31 1 4 6335 M obile: + 44 (0)751 5 974 786 rtaylor@consultancy-pr.com.hk Em ail allgraylingukeiu@grayling.com : Americas Australia and New Zealand Grayling New York Cape Public Relations Ivette Al eid a m Telephone: (02) 821 8 21 90 Tel: + (1 ) 91 7-302-9946 Sara C rowe Ivette.almeida@grayling.com M: 0437 1 61 91 6 sara@capepublicrelations.com Katarina Wenk-Bod enm iller Luke Roberts Tel: + (1 ) 646-284-941 7 M: 0422 855 930 Katarina.Wenk-Bodenmiller@grayling.com luke@capepublicrelations.com Master Template 15 www.gfs.eiu.com
Editor's Notes
- #3 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.
- #4 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.
- #5 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.
- #7 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.
- #9 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.