OUTLOOK
The Global Economy With regards to the state of the world economy over the next 12 months, there would appear to be two main preoccupations. According to the OECD, a further intensification of euro area instability could have significant impacts on the levels of global demand. The IMF is also of the opinion that uncertainty over the debt crisis in the eurozone is the greatest risk to the world economy.
The second preoccupation is that US failure to avoid the looming ‘fiscal cliff’ could derail an already weak recovery. To explain this, there are widespread and deep concerns in the US over the impact of up to $600 billion of expiring tax cuts, new taxes, and automatic spending cuts that are all set to take effect at the end of 2012 or the beginning of 2013. If they hit all at once, the impact could amount to as much as 4 percent - 5 percent of GDP, according to some sources, the equivalent of falling off a ‘fiscal cliff’. Some experts anticipate that the economy would experience a significant slowdown and there would be major consequences for financial markets.
Given these uncertainties, many of the world’s financial institutions have revised downwards their predictions for global growth levels for this year and next. In September, the head of the IMF announced that the organization was set to cut its July forecast for global growth, saying ‘We continue to project a gradual recovery, but global growth will likely be a bit weaker than we had anticipated even in July, and our forecast has trended downward over the last 12 months’ (The Independent). In July, the IMF cut its global growth projection for 2013 to 3.9 per cent, but its latest forecast for global output growth for 2012 is 3.3 percent, split between 5.3 percent expansion in the emerging world and 1.3 percent growth in the developed world.
Projected real GDPs per country are shown in the table below.
Reed Exhibitions | EIBTM Trends Watch Report 2012 25
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