2012 was, if nothing else, a year of pronounced economic uncertainty for many countries around the world, and for most of them, this trend will linger into 2013. In Europe, a fiscal crisis continues to kindle doubt about the survival of the euro, creating uncertainty that is casting a shadow on real economic performance in the new year. The United States may have already entered recessionary territory. Likewise, China, India, and Japan are treading uncertain economic waters and scrambling to establish or maintain economic growth.
This first-quarter edition of the Global Economic Outlook begins with Alexander Börsch’s assessment of the Eurozone, where uncertainty remains a recurring theme. Concerns about the future of the shared currency are giving way to worries about the real economy, which may take their toll on growth prospects in the coming year.
Next, Carl Steidtmann suggests that the United States, like Europe, is already in a recession. He offers his rationale for a negative GDP forecast that may pull the United States into recessionary territory in early 2013. He suggests that the depth and duration of this recession will differ according to the speed of the resolution.
My assessment of China’s economic outlook is comparatively optimistic. Chinese economic growth is accelerating after slowing down for most of 2012. Improving exports, industrial production, retail sales growth, and declining consumer price inflation suggest that China is, in fact, on the mend. However, the country will need to navigate significant challenges, including ebbing foreign direct investment, a transition in political leadership, and the country’s ongoing need to shift away from export-led growth in favor of its consumer-driven counterpart, all of which raise questions about China’s ability to stay its course.
Next, my outlook for Japan, entitled “Back into Recession,” suggests that Japan did not end 2012 on the optimistic note it enjoyed a year ago. The country’s exports have been hampered by a recession in Europe, declining automobile sales, waning government spending, aggressive monetary policy that hasn’t offset the country’s formidable deflationary pressures, and a high-valued yen that continues to compromise the competitiveness of Japanese exports.
Finally, Pralhad Burli writes that growth in India may improve over the next two quarters after experiencing a period of deceleration. Economic challenges, including a burgeoning fiscal deficit, low investments, elevated inflation, and high interest rates are looming over India’s outlook.