We have cut our global GDP growth forecasts to 3.9% in 2011 and 3.8% in 2012, from 4.2% and
4.5%, respectively. Developed-market growth looks set to average only 1.5% this year and next
(down from 1.9% and 2.4% previously), making the recovery even more bumpy, below-par and
brittle (BBB).We now see EM growth decelerating from 7.8% in 2010 to 6.4% (6.6% previously)
this year, and further to 6.1% (6.7%) in 2012. Apart from disappointing incoming data, the main
reasons for our growth downgrade are recent policy errors in the US and Europe, plus the
prospect of further fiscal tightening there in 2012. This is eroding business and consumer
confidence and has weighed on financial markets. A negative feedback loop between weak
growth and soggy asset markets now appears to be in the making.
4.5%, respectively. Developed-market growth looks set to average only 1.5% this year and next
(down from 1.9% and 2.4% previously), making the recovery even more bumpy, below-par and
brittle (BBB).We now see EM growth decelerating from 7.8% in 2010 to 6.4% (6.6% previously)
this year, and further to 6.1% (6.7%) in 2012. Apart from disappointing incoming data, the main
reasons for our growth downgrade are recent policy errors in the US and Europe, plus the
prospect of further fiscal tightening there in 2012. This is eroding business and consumer
confidence and has weighed on financial markets. A negative feedback loop between weak
growth and soggy asset markets now appears to be in the making.
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