Global Scenarios - Stuck in the mud | Danske

[Jay Shah]

Global overview - Stuck in the mud

• The global economy disappointed sharply in H1 and the outlook has become more downbeat. However, we expect some stabilisation in global growth in the coming quarters before a slight recovery sets in towards the end of the year.
• We have revised down our growth forecasts for all regions and expect global activity to remain sluggish for some time.
• We now expect growth in the US to be 2.2% in 2012 and 2.0% in 2013. This is below trend growth and is likely to trigger further stimulus from the Fed. Fiscal policy is likely to be a further drag in 2013 and we expect it to dampen growth by 1-2 percentage points.
• The euro area recession has deepened and looks set to be more protracted than previously expected. We look for a drop in GDP of 0.4% in 2012 followed by very weak growth in 2013 of 0.5% - mostly led by higher exports.
• Chinese growth disappointed in H1. But we expect stimulus measures to lift growth towards the end of the year, which would give support to global activity.
• The main risk factor is still the euro debt crisis and despite the latest initiatives we are still quite concerned about the medium-term risks. Uncertainty surrounding the fiscal cliff in the US also provides downside risks to the outlook.

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Best Regards,
Jay Shah, FRM
Expect the unexpected!!!