Economic Outlook April 2012

The global economic outlook has recently stabilised, after a period of rapid deterioration in the second half of last year. We expect slower global growth and a mild recession in the Eurozone in 2012, with significant downward risks to the global outlook.

Global economic growth will fall to 2.6% as advanced economies slow sharply and emerging economies cool down.

Risks to the outlook are significant: the crisis in the Eurozone has been only temporarily alleviated by the European Central Bank, and unrest in the Middle East may lead to a further increase in the price of oil.

The Eurozone economy is expected to contract, with Latin American growth slowing to 3.6%, while Asian growth increases to 4.9%. The United States is continuing its recovery with predicted growth of 2.3%.

Credit conditions remain tight across advanced markets and emerging Europe as the financial sector consolidates its debt and seeks additional capital to comply with new regulation.

Our forecasts project an increase in insolvencies across many European economies.

An important driver of the global economy is growth in Asia and Latin America, with emerging economies continuing to catch up with the advanced economies and increase in economic importance. Meanwhile, the Eurozone debt crisis deepened over the second half of 2011, and is pulling the real economy into recession. Through financial and trade linkages, the Eurozone crisis is proving the largest risk to the global outlook.

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