Global growth: Falling beneath the threshold

 Published: 1/18/2012 12:34:04 PM GMT
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Abstract: THE first two weeks of 2012 have been less newsy than the first fortnight of 2011. The impression of growing stress across much of the world economy is nonetheless inescapable. Trouble is brewing. It's been brewing; it's spilling over the brewpot, for god's sake won't someone stop this damned brewing.The World Bank provides a big picture take on the shaky world economy today, with the release of its Global Economic Prospects report. Global growth is expected to slow slightly in 2012, and the euro-zone economy is forecast to shrink 0.3% for the year. The chart at right gives a sense of how much darker the global picture has grown over the past 7 months. The outlook for the euro zone has deteriorated most rapidly, but diminishing optimism is quite widespread.It's quite difficult to read the World Bank report and not conclude that more downward revisions of expectations are likely to occur. It's chock full of looming risks. The euro area is obviously the point of greatest concern, but other regions are vulnerable and may succumb to crisis pressure. Many emerging markets, the report notes, have less fiscal room to battle a slowdown than was true in 2007. Many will also need to finance plenty of their own debt this year, and could find themselves in significant trouble if ongoing euro problems suck more capital back to the continent.The authors of the report game out two ...

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