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Deloitte Global Economic Outlook for Q4 2011

Deloitte Global Economic Outlook for Q4 2011

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Published by: Ciocoiu Vlad Andrei on Nov 23, 2011
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 A Deloitte Researc publication
| 4th Quarter 2011
Stressful Times
 A crucial time or action
United States
The coming recession
Looking north
Gold prices: deying gravity?
Last quarter, we began by stating that the biggest issues acing the global economy arethe crisis in the Eurozone and uncertainty about the path o U.S. monetary and scalpolicy. Well, nothing seems to have changed. These remain the big issues. And yet, muchhas indeed changed. Since we published our last report at the end o July 2011, there hasbeen one crisis ater another.In Europe, the members o the Eurozone agreed on a new package or assisting Greece,only to nd that nancial market stress kept getting worse as market participants doubtedthe package would be sucient. Hence, as o this writing, discussions are under wayto nd a larger solution, and markets evidently have much lower expectations that theproblem will actually be resolved.In the United States, August witnessed a stressul round o negotiations on the budget,the results o which have been questioned by many. Then, U.S. government debt wasdowngraded or the rst time in history, equity markets ell rapidly, the economy appearedto stall, and businesses were let wondering whether another recession was imminent. Inemerging markets, concerns about rising infation and rising currencies have been replacedby ear o a global slowdown and rapid currency depreciation.In this issue o the Global Economic Outlook, we address all o these issues. First, ElisabethDenison oers a cautiously hopeul assessment about the prospects or preserving theeuro. She discusses what must happen in order or the Eurozone to have a chance olong-term success. On the other hand, she recognizes the considerable risk o ailure andthe high risk o recession i the Eurozone ails. For now, she sees recession taking holdprincipally in the peripheral nations o the EU rather than Germany and France.Next, Carl Steidtmann oers a ar more pessimistic view in his assessment o U.S.economic prospects. His argument is that the serious problems in Europe, which havea high probability o getting worse, are already having a negative impact on the U.S.economy and are likely to push the United States into another recession. He notes that,even absent the European crisis, the U.S. economy is already teetering on the edge withextremely slow growth and a dormant job market. Add to this the nancial contagionrom Europe, and the result is nancial market stress causing a slowdown in creditcreation.In our next article, I provide some thoughts on the outlook or China. In particular, I notethat China appears to be decelerating due to the negative impact o a global slowdown
Global Economic OutlookQ4 2011
Global Economic Outlook 
publised quarterly byDeloitte ResearcEditor-in-cie
Ira Kalish
Managing editor
Ryan Alvanos
 Pralhad BurliElisabeth DenisonNeha JainSatish RaghavendranSiddharth RamalingamCarl SteidtmannIan Stewart
Editorial address
350 South Grand StreetLos Angeles, CA 90013Tel: +1 213 688 4765ikalish@deloitte.comand the lagged eect o tightening monetary policy. Ialso look ahead at potential troubles coming rom thedebts accumulated by local governments to und invest-ment in xed assets. The end result could be a substantialslowdown in growth.Following China, I look at the Japanese economy, whichactually oers one o the ew bright spots in the globallandscape. Due to spending on reconstruction, theJapanese economy is likely to grow aster next year thanthis year. On the other hand, Japan still aces considerableobstacles to a return to sustained growth.Ian Stewart then provides his prognostications or the UK.He says that the outlook or the UK economy is deterio-rating, not only because o weaker domestic undamen-tals, but more importantly, because o headwinds romthe neighboring Eurozone. Ian also discusses how theuncertain business environment has moved corporatestrategies toward a more deensive posture, as evidencedby Deloitte UK’s CFO survey.Next, Siddharth Ramalingam presents his outlook or India.Like Europe and the United States, India aces a slowdownin growth. But unlike those countries, the problem in Indiais that growth has been too rapid, thus leading to uncom-ortably high infation. The challenge or policymakers is tobalance the ght against infation with a desire to retainsucient growth.In my outlook or Russia, I discuss how recent politicalannouncements oer clarity regarding Russia’s politicaluture but ail to provide clarity about the economicpolicy environment. I also discuss how a combination omonetary policy tightening and headwinds rom WesternEurope will likely lead to slower growth in Russia.As or Brazil, I note the recent reversal in monetary policyas the central bank switches rom ghting infation topreventing a recession. I also discuss how the crisis in theWest led to a dramatic shit in the direction o Brazil’scurrency, causing the authorities to change the direction ocurrency market intervention.In our eature article on Mexico, Pralhad Burli discussesMexico’s considerable challenges as well as its greatpotential. He notes that Mexico has ailed to grow at therate o the BRICs and has thus been let behind. He alsonotes, however, that there are a number o actors thatcould boost uture growth or Mexico.Finally, Satish Raghavendran and Neha Jain provide someperspective on the actors that infuence the price o gold.Given the roller coaster path that gold has lately experi-enced, this issue should be o considerable interest to ourreaders.
Dr. Ira Kalish
Director o Global EconomicsDeloitte Research

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