From Euromonitor: Special Report: 2011 World Economy in Review. In January 2011 Euromonitor International released a Special Report on Global Economic Prospects in 2011. In this report Euromonitor identifies how 2011 played out in five keys areas.
- World growth will slow in 2011; rebalancing remains the key. World growth did indeed slow in 2011 but to an even greater extent than predicted in January. Latest projections for global real GDP growth for 2011 as a whole stand at 3.9%;
- Commodity markets should be relatively stable with upward pressure on prices being moderate. As expected, food prices continued to remain high – with some exceptions, such as poultry and palm oil. The IMF Food Price Index was 22.8% higher in January-November 2011 compared to the same period in 2010
- Unemployment will continue to be a problem in the developed world. Global unemployment has been a key issue facing the global economy in 2011, and has emerged as a weak link in the recovery – particularly in advanced world economies. With the economic outlook deteriorating in the second half of 2011, it now looks like the unemployment rate in advanced economies will not return to 2008 levels until 2018;
- Tighter fiscal policies will slow the recovery in the most advanced economies. Sovereign debt and government budget deficits have dominated the news in 2011, particularly in the eurozone. The state of government finances in advanced economies is widely recognised as the key challenge facing the global economy.
- Growth of world trade will moderate but global imbalances remain wide. We said: “World trade fell at a rapid pace during the Great Recession but the recovery was also swift.” BUT “A full recovery of the global trading system will probably be even more protracted than the admittedly slow recovery in world output.”
What will 2012 bring? The world economy faces exceptional – perhaps even unprecedented – uncertainty as it enters 2012. The rebound in output among developed countries has proven feeble, yet fiscal austerity is being launched, especially in the eurozone. The collective austerity of developed economies will likely bring on one of the most severe fiscal contractions in many years. These effects will be partly offset by developing countries, although growth is moderating as global financial conditions deteriorate.
The world economy will grow by 3.8% in real terms in 2012, down from 3.9% in 2011 and 5.2% in 2010. The slowdown is a consequence of financial instability and fears of sovereign risk, which threaten to spread beyond a few European economies. In other developed countries (such as the USA) policy indecision exacerbates uncertainty. As a result, stimulus programmes launched in 2010-2011 are being replaced by austerity measures. The outlook is brighter for developing countries. External demand is weakening but in most emerging economies domestic demand should propel growth until the world economy becomes healthier. However, the outlook for developing countries is not risk-free. A few countries with especially open economies and dependence on demand in developed markets could struggle. Policy makers in larger developing countries generally have more flexibility than is available in the advanced world, meaning that the possibility of a soft landing is more likely than a hard one.