The Global Economy


We expect the global economy to decelerate slightly in 2012; however, economic momentum should begin to pick up slowly in the second half of the year. Over the course of 2012, we expect to see an annualized increase in global GDP of 3.25 %. Considering the under-utilized capacities in the industrial nations and the positive basis effects of energy prices, the global inflation rate will decline from nearly 4.5 % in 2011 to around 3.5 % in 2012. Although we project a recovery in global economic growth to 4 % in 2013, the global inflation rate should remain below 3.5 %.

The ongoing slowing of economic growth is originated in the industrial countries, in particular, in the eurozone. We expect that once the stricter budget rules are enacted and their observance is more strictly and institutionally anchored, and once greater success is achieved in the consolidation and reform programs of the countries affected, the sovereign debt crisis in the eurozone will gradually become less severe. Furthermore, the liquidity provided to banks through the three-year tender of the European Central Bank should mitigate the situation at the banks themselves and provide easing ahead of the massive volume of bond refinancing that southern European countries will require this spring. However, the eurozone economy might have slid into a technical recession during the winter period 2011/2012, so that even with a recovery over the course of the year, GDP is likely to decline by 0.5 %. On an annualized basis, Germany will probably be the only larger country within the eurozone that will not shrink, though the economy may stagnate. In contrast, we believe there will be a significant decline in GDP in some of the southern European countries. Driven by external demand and a smaller impact from fiscal consolidation, growth in the eurozone should pick up again in 2013 and reach 1 %, the same rate as in Germany.

For the U.S., we are projecting an increasing growth rate over the course of the year. At 2.5 % annualized, it should be slightly higher than last year. Companies in the non-financial sector continue to be in a very robust financial shape. Furthermore, there were increasing indications at the beginning of the year that the housing market has started to reach a floor, after declining five years. Regarding U.S. unemployment figures, a turnaround became apparent recently, which could at least stabilize consumption at the current relatively moderate rate of expansion. The U.S. economy is likely to continue its expansion in 2013 with an annualized growth rate of 3 %.

Over the course of 2011, as the catch-up effects in world trade tapered off, the growth rate in emerging markets declined only slightly. With the receding risk of inflation, a few Latin American countries and, recently, both China and Israel reacted with an easing of monetary policy. The emerging markets’ more robust domestic demand, compared with industrial countries, together with the scope they will probably continue to use for monetary and fiscal policies, should limit the impact industrial countries’ weaknesses will have on the emerging markets. In Asia (excluding Japan) GDP growth in 2012 should come to nearly 7 %, which is only slightly below the 7.25 % seen in 2011. With the gradual recovery of the global economy and the reconstruction investments in Japan to rectify the damages caused by the catastrophe last March, the Japanese economy should stabilize and expand on an annualized basis of 0.75 %. Asia (excluding Japan) and Japan will probably contribute to faster global GDP growth in 2013. Growth rates could increase to 7.4 % and 1.1 %, respectively. For Latin America, we expect GDP growth to slow from 4.25 % to 3.75 % in 2012 and again increase to 4.2 % in 2013.

Uncertainties for the economic outlook are primarily due to the political developments in Europe. The rescheduling of Greek debt and the second rescue package for Greece are crucial. However, the markets could lose trust in the reform efforts of other countries, especially if the economic trend continues downwards. The pending decisions on the specific conditions of the eurozone rescue mechanisms imply a significant potential for conflict, which could lead to massive disruptions on the financial markets. Meanwhile, the national debt level in the U.S. has reached 100 % of GDP. Considering the political stalemate there, a renewed escalation with need for a further rising of the debt ceiling is considered possible during the election campaign. Moreover, the current acceleration of the American economy could turn out to be unsustainable. In the Middle East, the conflict in connection with the Iranian nuclear program could become much more severe.

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Deutsche Bank Annual Report 2011

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