Jintao, implying a generational change in the Chineseleadership.
The Brazilian slowdown was spectacular in 2012
, withgrowth up only 1% on average after 2.7% in 2011. Hit by theslowdown in global trade, and especially China’s weakness,Brazil was also affected by an overvaluation of its exchangerate. The reason was that due to the monetary policiesconducted by the US Federal Reserve in the past few years,the
had appreciated drastically, hampering thecompetitiveness of the Brazilian economy. In addition, giventhe persistent inflationary pressures, the room for manoeuvrein terms of economic policy has remained limited. Even so,the Brazilian central bank cut the Selic rate by more than 5percentage points between August 2011 and end-2012 andstimulus measures aimed at boosting growth were taken,which stopped the fall in domestic demand.After the rebound in growth recorded in late 2011 and early2012 linked to the after-effects of Fukushima
, the Japaneseeconomy slowed down sharply in the second half of 2012(Chart 5)
. All in all, growth will come in at 1.6% on average in2012 after a recession of 0.7% in 2011. Growth was alsoaffected in the second half by the political tensions with Chinaand the parliamentary elections. The Japanese economyonce again remained in deflation in 2012.
In the United States, the elections were the mostsignificant event of 2012
. They did not change the politicalconfiguration that had prevailed in the previous two years,with on the one hand the re-election of Barack Obama to thePresidency and on the other hand the persistence of adivided Congress (the House of Representatives remains inthe hands of the Republicans while the Democrats have themajority in the Senate). This means that the implementationof the Obama programme is far from assured and that anydecision will be the result of a bipartisan agreement. From theautumn onwards, the economic news was also dominated
bythe discussions on the fiscal cliff
. A fiscal shock of 4percentage points of GDP should have hit the US economy inearly 2013 barring a vote by Congress in favour of anextension of certain tax cuts or a limit to the automaticspending cuts. An agreement finally occurred the last day ofthe year. The political divisions once again caused a climateof uncertainty at the end of 2012, a replay of the drama in thesummer of 2011 when an agreement was found at the verylast moment (increase in the debt ceiling). On the growthfront, the US economy weathered the global slowdownrelatively well, with a growth rate of 2.2% on average in 2012after 1.8% in 2011. This resilience is to a large extentexplained by the economic policies conducted, as fiscalpolicy did not become restrictive and monetary policycontinued to ease. Nevertheless, the fiscal deficit declined to6.7% of GDP in 2012 from 8.6% in 2011 thanks to a reboundin revenues
Household consumption slowed in2012 (+1.8% on average vs. 2.5% in 2011) and companiesalso invested less in equipment (+6.5% after +11% in 2011).On the other hand, investment in structures and residentialinvestment accelerated, giving way to a real estate marketrecovery.
2012 was marked by an improvement in the realestate sector after five years of adjustment
: housing startstook off again, inventories fell markedly and prices returned toan upward trend
The job market improved, witharound 1.8 million jobs created and a fall in theunemployment rate from 8.3% in January to 7.7% inDecember
Inflation fell noticeably over the year(2.1% on average after 3.2% in 2011), thanks to the gradualdisappearance of the effects of the sharp increase incommodity prices in 2011.
There was a lot of economic news in the euro zone in2012
with a number of European summits paving the way forsome progress on the institutional level but still not on thecrucial path towards federalism (budget at euro-zone level,pooling of public debts, etc.). Progress was made on the issue of banking union, but without any real pooling of risk
The euro zone
- the weak link of the global economy in 2012-
continued to be affected by the sovereign debt crisisthrough various channels
. While the financial environmentgradually improved thanks to the interventions by theEuropean Central Bank
, the ongoing fiscal austerityhampered growth significantly in the peripheral countries andalso, as a consequence, in the other countries in the zone viatrade flows. The zone-euro fiscal deficit was reduced from4.1% of GDP in 2011 to 3.5% in 2012. Some countries foundit difficult to keep their fiscal deficit commitments, given thenegative effects on growth
. Furthermore,deleveraging among private agents continued in certaineconomies, also weighing on growth. The heterogeneitywithin the zone was pronounced, with some countries stillposting positive growth rates, e.g. Germany (1% on average),and some countries recording falling GDP
Spainand Italy, which slid into recession in the second half of 2011,remained there in 2012, with GDP contracting by 1.6% and2.1%, respectively. France avoided a recession, but recordednegligible growth, i.e. 0.1%. Consumption as well asinvestment declined in the euro zone. Household incomesadjusted downwards due to the deterioration in employmentand wages while inflation remained relatively high during alarge part of the year (2.5% at an annual average),nevertheless before declining towards the end of the year
. Faced with the deterioration in demand, thegloomy outlook and difficult lending conditions, companiesreduced their investments in 2012
Theunemployment rate stayed on its upward trend, rising from10.8% at the beginning of the year to 11.9% in December,with marked divergences between countries: the Germanunemployment rate fell slightly (from 5.6% to 5.4%) while theFrench unemployment rate rose by 1 percentage point, from10% to 11% at the end of 2012. The unemployment rateincreased sharply in some peripheral countries (+3percentage points to 26.5% in Spain)
. Frenchnews was marked by the presidential elections and by the leftreturning to power. In terms of public finances, slashing thefiscal deficit remained the new government’s priority so as toanchor its credibility, which will inevitably have an impact onFrench growth in 2013.
The United Kingdom,
while not part of the euro zone
, alsoshowed signs of weakness in 2012 with a recession of0.2%,
mainly owing to the reduction in the fiscal deficit.Activity fluctuated strongly during the year, with the temporarypositive effects of the hosting of the London Olympic Gamesduring the summer.
In 2013, we do not expect any noteworthy recovery in theglobal economy
, with a growth rate that on average willremain close to the pace recorded in 2012 (slightly lower than3% in PPP terms). Our forecasts are in the lower range of theforecasts for many countries, especially the United Statesand the euro zone. Our caution is based on the idea that theongoing adjustments in economic agents’ balance sheets willcontinue to hamper growth in developed countries and thatthe economic policy leeway in the large emerging countries islimited. The key features of our scenario for 2013 are asfollows: 1/ The deleveraging among private economic agents
See section on interest rates for a review of the main events of thesovereign debt crisis
See section on monetary policies.