Economic Outlook 2/2012

illustration: frontpage for the report economic outlook(31.08.2012) The global economy grew by approximately 3 percent in the first half of the year, somewhat less than assumed trend growth and last year’s 3½ percent, but basically in line with what we predicted at the beginning of the year.

We currently project global GDP to expand by 3¼ percent this year, somewhat stronger than we estimated in January. The weak growth reflects continued reduction of global imbalances that accumulated in the mid 2000s, which was further exacerbated by the ongoing crisis in the euro area. Our primary view is still that all of today’s 17 members will remain in the eurozone. Still, the danger of countries being pushed out and the currency union collapsing is uncomfortably high. In the event of a collapse the growth scenario we depict in this report would be substantially weaker. And even with decent growth, such as in our baseline scenario, it will probably take years for capacity utilisation in industrial economies to return to normal.

This means that we have many years to come with low inflation and correspondingly low interest rates, both short and long-term. Neither does it seem likely that the mountain of public debt will be reduced much in the near future. The solution may be sovereign debt restructurings, higher inflation, or so-called financial repression.

New forecasts

New forecast/prognosis economic outlook report