In the fourth quarter 2011 issue of the Global Economic Outlook, Deloitte economists examine the stresses and uncertainties in the economic environments of the eurozone, the United States, China, Japan, the United Kingdom, India, Russia, Brazil, and Mexico.
“In the eurozone the financial market stress has worsened, while in the US businesses are wondering whether another recession is imminent,” said Ira Kalish, director of Global Economics, Deloitte Research, part of Deloitte Services LP in the United States. “Currently concerns about rising inflation and rising currencies in emerging markets have been replaced by fear of a global slowdown and rapid currency depreciation.”
The fourth quarter issue of the Global Economic Outlook features a special section on the future of gold. The report states that gold prices have followed an unbroken ascent since the beginning of the decade and are expected to remain elevated until the eurozone crisis is resolved, the US economy is revitalised, and inflation in the emerging markets is tamed.
In Europe, sentiment continues to deteriorate as the dwindling global demand and the unresolved sovereign debt crisis pose significant recessionary pressures. However, there is a case for cautious optimism about the euro’s longer-term prospects, according to the report.
The report offers a rather pessimistic view of the US economy, including the suggestion that a recession of European origins could wash back into the US economy by hampering trade, industrial production, corporate profitability and banking.
China’s economy is expected to experience slower growth due to the weakening global economy. Meanwhile, there are some long-term risks given the country’s increasing debt and significant investments in fixed assets.
The report suggests that in Japan there is one of the few economic bright spots. As the country recovers from a natural disaster, it may experience additional spending that will likely accelerate the country’s economy next year. But obstacles are still present, specifically in slower overseas growth, a high-valued yen, and slow reconstruction spending.
The United Kingdom’s declining domestic fundamentals and downward economic pressures from abroad are causing the decline of the country’s economic growth. According to the report, the future of the UK economy depends upon policy responses within the country and the eurozone.
Policymakers in India are attempting to keep rapidly rising inflation at bay and also sustain growth. According to the report, GDP growth in India is expected to be around 7.5 per cent for the current fiscal year.
While Russia displays a political clarity with Prime Minister Vladimir Putin returning as President, uncertainty abounds about the country’s economic policy outlook. As suggested in the report, a combination of monetary policy tightening and troubles in Western Europe is likely to decelerate growth in Russia.
Authorities in Brazil recently reversed the country’s monetary policy, moving from inflation fighting to recession prevention, and it is likely that interest rates will be cut further in the future, according to the report.
Finally, the fourth quarter Global Economic Outlook suggests that significant challenges have been raised in Mexico, such as violent drug cartels and a possible economic downturn in the US, its major trading partner. Additionally, the country has failed to keep pace with the BRICs. However, if policymakers effectively tackle the country’s issues, future growth is a strong possibility.