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Global Economic Outlook Q2 2012

Global Economic Outlook Q2 2012

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Published by: Ciocoiu Vlad Andrei on May 23, 2012
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05/29/2012

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 A Deloitte Researc publication
| 2nd Quarter 2012
A CollectiveSigh of Relief 
Eurozone
Could this be theturning point?
United States
Why the euphoria?
United Kingdom
The outlook brightens
Japan
New risk actors
India
A delicate balance
Trade patterns ote uture
Waking up andsmelling the coee
 
2
We’re several months into the year 2012, and things are beginning to look less dire thanthe last ew months o 2011. In Europe, a second bailout o Greece has at least postponeddisaster. Plus, action by the European Central Bank may have averted a deeper downturn.In the United States, growth continues at a modest pace, but signs o trouble have notcompletely gone away. And in China, the economy appears likely to avoid a hard landing.While there is no cause or celebration, business leaders can at least utter a collective sigho relie that things are not worse.In this issue o the
Global Economic Outlook 
, we take a close look at the actors drivingthe global economy. We begin with Dr. Alexander Börsch’s analysis o the Eurozone.The title o his article — “Could this be the turning point?” — draws attention to the actthat things are not as bad as some had predicted. He notes that our major decisions inEurope in recent months have improved the outlook, reduced the risk o catastrophe, andmoderated the severity o the recession. In addition, Alexander takes a close look at whatmay be required in order or Greek membership in the Eurozone to be sustainable.Next, Carl Steidtmann maintains his relatively pessimistic stance on the U.S. economy. Hesays that some o the data points that appear to herald improvement are really ratherephemeral. For example, he notes that economic activity has been boosted by goodweather, temporary tax incentives, and inventory rebuilding — hardly the stu o sustain-able recoveries. He also points out some o the unintended consequences o the Fed’smonetary easing. Finally, while Carl acknowledges that modest growth can continue orsome time, he cautions that there are many “at tail” geopolitical risks that could pull theUnited States into another downturn. Also included in Carl’s article is an analysis o oilprices and their impact on economic activity.In our third article, I take a look at China’s economic outlook. I discuss how Chinesegovernment policy has been eective in partially osetting the negative externalheadwinds aced by China’s export sector. The result is likely to be a sot landing thisyear. However, China continues to ace longer-term challenges, some o which are beingpushed urther down the road by the ailure to address them in the short term.Next, Ian Stewart examines the UK and concludes that the economy is doing ar betterthan earlier thought, but its perormance in 2012 is still expected to be relatively poor.Ian examines the Deloitte UK CFO Survey and nds that business leaders have signi-cantly improved their perceptions and expectations. This should have a tangible eect oneconomic activity. Ian also notes that a combination o easier monetary policy and thelessening o crisis in Europe will likely help the UK to avoid recession in 2012.Siddharth Ramalingam then provides his outlook or the Indian economy. He notes thatthe central bank is caught between a rock and a hard place. That is, the central bank mustworry about uncomortably high infation as well as decelerating growth. In addition, alarge scal decit means that the government has ew policy options to deal with a dete-
Global Economic OutlookQ2 2012
 
3
Global Economic Outlook 
publised quarterly byDeloitte ResearcEditor-in-cie
Ira Kalish
Managing editor
Ryan Alvanos
Contributors
 Pralhad BurliAlexander BörschNeha JainSatish RaghavendranSiddharth RamalingamCarl SteidtmannIan Stewart
Editorial address
350 South Grand StreetLos Angeles, CA 90013Tel: +1 213 688 4765ikalish@deloitte.comriorating situation. Siddharth concludes that an easing omonetary policy will likely be the eventual outcome.My outlook or Japan begins by discussing problemsrelated to Japan’s trade balance, scal policy, and currency.Given these issues, it would seem natural to expecteconomic weakness. Yet I conclude that things will likelyget better in 2012 or several reasons: a more aggressivemonetary policy, a weaker yen, higher infation, and moregovernment spending on reconstruction.In the outlook or Brazil, I note that although Brazilhas experienced a deceleration, growth is expected torebound later this year. A loosening o monetary policyand a boost to investment in inrastructure and energyshould help to oset the negative external headwinds. Ialso discuss Brazil’s complaints about the impact o U.S.and EU monetary policy on the Brazilian exchange rateas well as global concerns about Brazil’s protectionistpolicy initiatives.In my outlook on the Russian economy, I note that thereare several conficting actors infuencing growth in Russia,and that the economy in 2012 is likely to grow more slowlythan in 2011. I also discuss the uncertainty surroundingthe uture o Russian economic policy and how the choicesmade by policymakers will determine uture growth.Next, Pralhad Burli oers a view on the economy oIndonesia, the world’s ourth most populous nation andone that has lately attracted much attention or its stronggrowth and positive prospects. Pralhad discusses theresilience o this interesting economy and how, despite avariety o obstacles, it is likely to see strong growth in thecoming years.Finally, Neha Jain and Satish Raghavendran look at globaltrade patterns. They note how, with rising wages and arising currency in China, the world’s most populous nationmay no longer be the “world’s actory.” Rather, globaltrade patterns are changing in interesting ways. O mostinterest is the rising role o Arica and the Middle East inglobal trade. 
Dr. Ira Kalish
Director o Global EconomicsDeloitte ResearchWe are conducting a survey is to determine the level o reader satisaction oDeloitte’s
Global Economic Outlook.
The survey results will help us understand yourneeds and modiy our product to better serve them. We ask that you provide yourcandid eedback. Your responses will remain anonymous. The survey will take only5–10 minutes to complete. You can access the survey by clicking on this link or bypasting it in the address bar o your internet browser:
ttps://survey.deloitte.com/wsb.dll/10475/GEOsurvey.tm
Thank you or sharing your opinions.

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