World economic growth is forecast to slow to 2.7% in 2012, from 3% in 2011, as growth in emerging countries runs out of steam and the ‘submerged’ countries sink further into the mire.
The euro zone, hanging in limbo, will record sluggish growth (0.3%) and its member states will experience periods of recession (some brief, some longer); only the United States will enjoy a fragile period of grace with 1.8% growth in 2012.
Country risk balance will remain negative and corporate insolvencies will start to rise again in 2012 (+3%)
2011 was by no means an easy year, between the Arab Spring, the Fukushima disaster, the sovereign debt crisis and hesitant governance in Europe. The fragile recovery experienced in the first half came to an abrupt halt in the second and growth in world trade was halved during the year. The deterioration is set to continue in 2012: world growth is not expected to exceed 2.7%, after 3% in 2011. Euler Hermes is forecasting sluggish growth in the first half, which could pick up in the second half with implementation of the announced parachute. Euro zone growth is forecast at 0.3% in 2012 while growth in emerging countries is expected to slow, down to 8.1% for China (from 9.2% in 2011) with growth of 3% for Brazil (as in 2011), for example.
Differences within the euro zone, but all slowing
The sovereign debt crisis and public deficits had a severe impact on the real economy in Europe in 2011. Lack of visibility and limited financing of corporate and household investment expenditure will undermine the growth outlook for euro zone countries to varying degrees: from the situation in Germany, which will stay above water with growth of 0.8% in 2012 (down from 3% in 2011), to an established recession in Greece (down by 2.7% in 2012 after falling by 5.5% in 2011) in Portugal (down by 1.9% in 2012 after contracting by 1.4% in 2011) and in Italy, where the economy will contract by 0.2% in 2012 after growth of 0.5% in 2011. “In France, GDP growth will slow to 0.4%, from 1.6% in 2011. Like in the United States, the 2012 political calendar will have an impact on activity, between pre-electoral waiting and subsequent readjustment of economic policy”, explains Euler Hermes’ Chief Economist, Ludovic Subran.
Inflation and unemployment will also be major factors for the euro zone’s balance in 2012. Inflation is forecast to slow from 2.7% in 2011 to 2.2% in 2012, contained by weaker demand and more stable commodities prices. Unemployment, however, will remain high, particularly in southern European countries.
Looking further forward to 2013, growth is forecast to pick up to 1.2%, once steps have been taken to reduce deficits and circumscribe systemic risk within the euro zone.
Read the whole article on eulerhermes.com.