World economy: EIU forecast

Excerpts from World economy: EIU forecast

We expect global GDP growth of 3.2% at purchasing-power parity (PPP) in 2012. 

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...we expect OECD countries collectively to grow by little more than 1% at PPP (Purchasing-power parity) this year...expect global economic growth to accelerate in 2013, as the euro zone emerges from recession and emerging markets such as China see stronger momentum.

...the ECB has injected more than �1trn of liquidity into the financial system, making it easier for banks in the euro zone to get funding and causing government bond yields in countries such as Italy to fall to much more sustainable levels.

Developed world

 

The US economy continues to enjoy surprisingly strong momentum, and we have marginally revised up our GDP growth forecast to 1.9% in 2012...GDP data could yet surprise on the upside if recent momentum is sustained...the ECB's injection of liquidity into the banking system...has been a major factor in reducing stresses.So too has the conclusion, after fraught negotiation, of Greece's sovereign debt restructuring, the largest in history. But stabilisation in the euro zone does not mean a return to economic health....the region will return to growth in 2013, but the recovery will be anaemic.

Emerging markets

But for now, emerging markets remain in the midst of a painful adjustment to reduced import demand from their customers in the West...China is also feeling the effects of economic weakness in Europe and the US, but we expect the world's second-largest economy to avoid a hard landing and remain an engine of regional growth in 2012. 

Exchange rates

The US dollar has lost ground against the euro this year as sentiment towards Europe has improved. This has prompted investors to venture into riskier assets again�also boosting emerging-market currencies�and to retreat from safe havens such as the dollar.

Commodities

Another risk is that Iran closes access to the Strait of Hormuz, through which 20% of the world's oil travels, in retaliation for US and EU sanctions. However, such a move would do most economic damage to Iran, and for this reason we consider a blockade of the Strait unlikely. Iran may seek other ways to retaliate, including using its influence in Iraq to slow that country's oil output.

...we have maintained our forecast for oil prices in 2012 at an average of US$110/b for dated Brent Blend. This is based on our central scenario that assumes military conflict involving Iran can be avoided.  

 

Source: Viewwire