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World economy: Forcast summary

For immediate release

Eurozone crisis still far from a solution but ECB funding eases pressure on banks and sovereigns;
US economic growth raised to 1.8% in 2012, up from 1.3% according to the EIU’s latest global forecast

β€’ The Economist Intelligence Unit expects world GDP to grow by 3.1% at purchasing-power parity in 2012. This marks a considerable slowdown from 2010 and 2011, and by some definitions would put the global economy perilously close to another recession. However, growth would need to weaken to about 2% to qualify as a recession.

β€’ The Economist Intelligence Unit retains its 40% probability of a euro break-up occurring within the next two years. Even if policymakers ultimately do enough to save the euro, which is still the Economist Intelligence Unit’s core assumption, the process won’t be quick or painless.

β€’ The Economist Intelligence Unit has raised its US GDP growth forecast for 2012 to 1.8%, from 1.3% previously, to reflect the improvement in current conditions. However, the US cannot fully escape the drag that the euro zone’s recession will create. Moreover, households still have a long way to go with deleveraging, which will make it difficult to sustain more rapid economic growth.

β€’ The Economist Intelligence Unit forecasts Japan to grow by 2% this year after largely overcoming the disruption to supply chains that crippled its economy in the wake of the natural disaster in March 2011.

β€’ Despite a slight downgrade to our forecast for Chinese GDP growth, the Economist Intelligence Unit does not expect a hard landing by the region’s main economic engine. Economic growth in globally integrated Asia and Australasia (ex Japan) is set to slow from 6.5% in 2011 to 6.1% this year, although the region will remain the world’s fastest-growing. Instead, the most worrying signs are emanating from India, which the Economist Intelligence Unit expects to expand by just 6.3% in 2012.

β€’ The Economist Intelligence Unit has raised its forecast for the average 2012 price of dated Brent crude oil to US$100/barrel from US$95/b. Oil consumption will increase in 2012 in tandem with the upward revision to the EIU’s US GDP forecast and signs that China's economy will avoid a hard landing.

Global Economic Forecast, February 2012 is available at http://gfs.eiu.com

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Sophie Kriefman, Grayling. Tel: +44 (0) 207 592 7924

About the Economist Intelligence Unit

The Economist Intelligence Unit (EIU) is the world's leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.

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