The world’s economy is “deeply into the danger zone” because of risks from the eurozone, the International Monetary Fund has stated. The IMF predicts the global economy will grow by 3.25% (after inflation) in 2012, down from an earlier forecast of 4.0%. Global output is forecast to expand 3.9% in 2013, down from a previous forecast of 4.5%.
The Washington DC-based IMF suggests that the eurozone is set for a “mild recession” in 2012, with a 0.5% reduction in real GDP expected, compared to a previous forecast of 1.1% growth. Our own forecast would have a deeper European recession.
A British Treasury official noted that “The IMF has downgraded its growth forecasts for all the major economies, reflecting the deterioration in the global outlook since their last forecasts in September,” as noted by the BBC.
German growth estimates have been reduced to 0.3% in 2012, down from the originally predicted 1.3% growth pace last September. Interestingly, the IMF stands by its 1.8% growth prediction for the U.S., based somewhat on recent strong domestic data on jobs and manufacturing, notes the BBC.
The IMF noted that Europe’s most pressing challenge was to restore confidence and put an end to the crisis in the euro area. The IMF warned that the “United States and other advanced economies are susceptible to spillovers from a potential intensification of the eurozone crisis.”
The IMF warned that overly aggressive austerity measures could backfire. “Going too fast (to cut deficits) will kill growth and derail the recovery,” noted an IMF economist. What’s needed is a credible, medium-term plan to reduce deficits over time, he said, adding that the United States and Japan have both so far failed to provide such plans (www.marketwatch.com).
Japan is forecast to rebound from a 0.9% contraction in 2011 to grow 1.7% in 2012, down from a September forecast of 2.3%. China is now expected to see growth slow from 9.2% in 2011 to 8.2% in 2012, and then pick up speed to 8.8% in 2013. Overall emerging markets and developing nations are forecast to see 2012 growth of 5.4%, down from a September estimate of 6.1%. Growth in 2013 is forecast at 5.9%.
|Quarterly economic survey The USA TODAY economic survey of 43 top economists was conducted January 12-18. Median estimates through Q1 2013:|
USA TODAY • Monday, January 23, 2012
Survey participants: Dean Baker, Center for Economic and Policy Research; Nariman Behravesh, IHS Global Insight; David Berson, The PMI Group; Tom Binnings, Summit Economics; Jay Brinkmann, Mortgage Bankers Association; David Crowe, National Association of Home Builders; J. Dewey Daane, Vanderbilt University; Rajeev Dhawan, Georgia State University; William Dunkelberg, NFIB; Megan Ellis, Manulife Asset Management; Michael Englund, Action Economics; Ethan Harris, Bank of America-Merrill Lynch ; Maury Harris, UBS AG; Hugh Johnson, Hugh Johnson Advisors; Paul Kasriel, Northern Trust; Dean Maki, Barclays Capital; Ken Mayland, ClearView Economics; James Meil, Eaton; Robert Mellman, J.P. Morgan; Joel Naroff, Naroff Economic Advisors; Frank Nothaft, Freddie Mac; Donald Ratajczak, Morgan Keegan; Martin Regalia, US Chamber of Commerce; David Resler, Nomura Securities International; Chris Rupkey, Bank of Tokyo-Mitsubishi UFJ; John Ryding, RDQ Economics; Joshua Shapiro, MFR; Robert Shrouds, DuPont; John Silvia, Wells Fargo; Allen Sinai, Decision Economics; James Smith, Parsec Financial Management; Sean Snaith, University of Central Florida; Sung Won Sohn, California State University; Neal Soss, Credit Suisse; Jeff Thredgold, Zions Bank/Thredgold Economic Associates; Bart van Ark, The Conference Board; Brian Wesbury, First Trust Advisors; Lawrence Yun, National Association of Realtors; Mark Zandi, Moody’s Analytics