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Global Economic Outlook 1st quarter 2012

Navigating uncertainty


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Global Economic Outlook_Q1_2012The first quarter edition of Deloitte Research’s Global Economic Outlook offers timely insights from Deloitte Research’s team of economists about the trends and events that are shaping the marketplace.

This issue begins with an exploration of public sector debt. The article claims that changing demographics, rather than a short-term decline in economic activity, is driving public indebtedness. The article goes on to outline the options available to policymakers trying to address this challenge and the consequences of allowing public debt to go unchecked. The issue also analyzes the global market for commodities. The ability to trade commodities through financial vehicles has increased price volatility, which influences both the short-term and long-term hedging strategies of global companies.

Additionally, this edition offers economic outlooks for the Eurozone, the United States, China, Japan, the United Kingdom, India, Russia, Brazil and Canada.

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The Global Economic Outlook report is published quarterly by Deloitte Research in the United States (part of Deloitte Services LP).

Topics

debtcrisis Debt crisis 2.0?: Aging and public finances
Dealing with demographic trends is a tricky but critical step. Addressing a short-term decline in economic activity while ignoring the demographic forces that underlie public expenditure is a recipe for an unprecedented debt crisis.

GEO Commodity price volatility: A catalyst for reverse globalization?
The increasing ability to trade commodities through financial vehicles is increasing price volatility, which is influencing both the short-term and long-term hedging strategies of global companies.

Geographies

Eurozone Eurozone: A decisive year for Europe
In 2011, the elements of a solution to Europe’s debt crisis were put in place. If EU leadership proceeds according to its plan, the Eurozone could turn the corner. On the other hand, businesses would be wise to plan for alternative scenarios.

USA United States: The razor’s edge
Troubles in Europe and a slowdown in China suggest that the United States is at risk of another recession. Growth is lingering at stall-speeds, consumers are tapped out, employment remains stagnant, and businesses remain wary of making commitments.

China China: More of the same
The Chinese economy is decelerating, and this slowdown could become more pronounced, given problems in the property market and the potential for defaults by borrowers. On the other hand, looser monetary policy and further measures could boost the economy.

Japan Japan: Growth in fits and starts
Declining industrial activity, retail sales, and consumer prices suggest that Japan can expect another slowdown. Still, massive spending on reconstruction should boost growth in 2012. Japan’s large public sector debt remains a pressing longer-term issue.

UK United Kingdom: Weathering the Eurozone storm
Economic headwinds in the Eurozone will likely push the UK into a mild recession, but a more aggressive monetary policy may help to offset some of the negative impact.

India India: Many challenges, few solutions
After a period of monetary tightening designed to curtail inflation, India’s economy is slowing significantly due to external headwinds. The rupee dropped sharply, and the government’s reversal on retail-industry liberalization is fostering uncertainty.

Russia Russia: Uncertainty rises
Political protests, capital flight, and dampening external demand are kindling uncertainty in Russia. The country’s weak currency, less flexibility for monetary policy, and stymied investment are conspiring to create a challenging business environment.

Brazil Brazil: Avoiding a slowdown
Brazil can expect moderate growth in the coming year. After dramatic policy changes last year to deal with a decelerating global economy, export growth slowed down, but debt-fueled consumer spending is expanding at a decent pace.

Canada Canada: All eyes on the external environment
The crisis in Europe and a high level of consumer debt are posing significant risks to Canada’s economic outlook. On the other hand, growing global commodity markets and improved performance of the U.S. economy could bode well for Canada’s economy.

Previous issues of the Global Economic Outlook are available here.

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