The latest Deutsche Bank World Outlook report has cut global growth forecast to 2.9% for this year and 3.2% in 2013 due to stalled recoveries in the US and Japan as well as planned American tax increases and spending cuts.
“The outlook for the world economy has deteriorated,” analysts led by Chief Economist Peter Hooper wrote in the report. “While new policy stimulus from the ECB and US Federal Reserve has underpinned equity and commodity prices in recent weeks, disappointing recoveries in the United States and Japan have left us little choice but to reduce our forecasts for global growth.”
The report explains: “We now expect the world economy to grow by 2.9% this year and 3.2% in 2013, down almost half a percent from our previous estimates. We are also pencilling in a 2014 forecast, of 3.8%, for the first time. Our forecast downgrade is mainly due to a much slower than expected recovery in the US, which is heading towards an ugly “fiscal cliff” at the end of 2012. We now see US growth of just over 2% for both this year and next.”
The report has also marked down its predictions for Japan due to a drop in reconstruction spending and a weaker export outlook. However, it has left its eurozone forecasts fairly steady, and expects the bloc’s economy to bottom out in the fourth quarter of this year. “But with a poor economic outlook and still considerable political uncertainty, we see a high risk of a return of serious tensions in the eurozone in the coming months. Most emerging markets, particularly India, Brazil and China, are also likely to struggle because of weaker exports to developed economies,” says the report.
Turning to interest rates, the report notes: “With inflation likely to remain broadly under control and central banks are doubling their efforts to support growth, we do not expect any interest rate rises in Europe or the US until 2015 at the earliest. Some emerging markets central banks, however, may be tempted to tighten policy next year if food price inflation picks up significantly.”
We keep you in the loop with Twitter, Facebook, YouTube, flickr or our RSS news feeds and podcasts. more