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Master Template1 Global forecasting service Economic forecast summary – May 2013 www.gfs.eiu.com
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The US economy has been doing well, with strong jobs growth and a sustained recovery in the housing market but the data softened in March. Congress’ failure to reach a deal on tax and spending has led to automatic spending cuts known as sequestration, which are unlikely to be reversed. Loose monetary policy and a recovering housing market will partly offset contractionary fiscal policy. We maintain our GDP growth forecast for 2013 at 2.1%, down slightly from an estimated 2.2% in 2012. We forecast average growth of 2.3% in 2014-17.
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The shock caused by the bail-in of bank depositors in the financial assistance deal for Cyprus seems to have been absorbed. The ECB’s OMT bond-buying programme (as yet unactivated) continues to exert a calming effect. A period of political instability is in prospect in Italy following elections which ended in stalemate. Conditions in the real economy remain dire and we have downgraded our 2013 growth forecast for the euro zone to - 0.7%. Fiscal consolidation will remain a drage on growth in 2013.
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We have upped our 2013 growth forecast to 1.1% from 0.9%. Demand will be boosted by the expansionary monetary and fiscal policies of Shinzo Abe. A weaker yen will provide some relief to Japan’s exporters. It will also contribute to raising the annual inflation rate to around 1.3% between 2014 and 2017. Over the long term the ageing of the population, combined with disorderly public finances, will make it difficult for policymakers to engineer a self- sustaining recovery in domestic demand. The consumption tax rate is forecast to rise from 5% at present to 8% in April 2014 and then to 10% in October 2015.
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Growth in 2012 was constrained by sluggish OECD demand and a policy- induced slowdown in China designed to deflate a housing bubble. Chinese data started to strengthen in the final quarter of 2012. But following 7.7% growth in the first quarter, we have revised down our 2013 growth forecast from 8.4% to 8%. We expect India’s growth to pick up in 2013 to 6.5%, after growth of just 3.3% in 2012. Following a slow start to 2013, we have cut our 2013 growth forecast for Russia to 2.8%.
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Oil consumption growth in 2013 has been revised down to 1.2% to reflect the downgrades to our euro zone and China GDP forecasts. Overall, consumption growth will average around 1.6% a year in 2013-17, led by the developing world. Geopolitical risks continue to weigh on the supply picture, particularly the tensions between the West and Iran. Still weak demand growth and ample supply will constrain prices in 2013, assuming no unforeseen disruptions to supply or heightened political risk.
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Demand will remain relatively subdued in 2013, constrained by weak OECD growth and only a modest pick up in China’s consumption Rising emerging market incomes and urbanisation will underpin medium- term demand growth Generally low stocks and uncertainty over supply will support agricultural commodity prices Nominal prices will remain historically high in 2013-17, but prices will ease in real terms
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The new governor of the Bank of Japan has announced a massive expansion of QE, with plans to double the monetary base by 2015. The Fed’s current monetary stimulus, a third round of QE, worth US$85bn in monthly bond purchases, is open- ended and will last until at least 2014. Given the protracted recession in the eurozone, an ECB rate cut is back on the cards, although not yet our central assumption. Some emerging market central banks may have to tighten monetary policy to control the threat of inflation.
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Europe’s debt crisis and a protracted recession will remain potential sources of pressure on the euro. The relative outperformance of the US is supporting the dollar at present, although it faces headwinds from the combination of loose monetary policy, fiscal tightening and a large external funding requirement. Japanese macroeconomic policy will keep the Yen weak. EM currencies should be supported over the medium term by positive growth and interest rate differentials with OECD economies.
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- One or more countries leave the euro zone - Tensions over currency manipulation lead to protectionism - The global economy falls into recession + A sustained decline in oil prices provides a global economic fillip - Social and political disorder undermine stability in China 16 20 15 12 10
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- US economy stumbles in the wake of a wave of fiscal tightening - Economic upheaval leads to widespread social and political unrest - An attack on Iran results in an oil price shock + Co-ordinated monetary stimulus kick-starts a global recovery - War breaks out on the Korean peninsula 10 8 8 5 9
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Master Template13 Access analysis on over 200 countries worldwide with the Economist Intelligence Unit T he analysis and content in our reports is derived from our extensive economic, financial, political and business risk analysis of over 203 countries worldwide. You may gain access to this information by signing up, free of charge, at www.eiu.comwww.eiu.com Click on the country name to go straight to the latest analysis of that country: Further reports are available from Economist Intelligence Unit and can be downloaded at www.eiu.comwww.eiu.com G8 Countries * Canada Canada * FranceFrance * GermanyGermany * ItalyItaly * JapanJapan * RussiaRussia * United KingdomUnited Kingdom * United States of AmericaUnited States of America BRIC Countries * BrazilBrazil * RussiaRussia * IndiaIndia * ChinaChina CIVETS Countries * ColombiaColombia * IndonesiaIndonesia * VietnamVietnam * EgyptEgypt * TurkeyTurkey * South AfricaSouth Africa Or view the list of all the countries.view the list of all the countries Should you wish to speak to a sales representative please telephone us: Americas: +1 212 698 9717 Asia: +852 2585 3888 Europe, Middle East & Africa: +44 (0)20 7576 8181 www.gfs.eiu.com
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Master Template14 Access analysis and forecasting of major industries with the Economist Intelligence Unit I n addition to the extensive country coverage the Economist Intelligence Unit provides each month industry and commodities information is also available. The key industry sectors we cover are listed below with links to more information on each of them. www.gfs.eiu.com Automotive Analysis and five-year forecast for the automotive industry throughout the world providing detail on a country by country basis Commodities This service offers analysis for 25 leading commodities. It delivers price forecasts for the next two years with forecasts of factors influencing prices such as production, consumption and stock levels. Analysis and forecasts are split by the two main commodity types: “Industrial raw materials” and “Food, feedstuffs and beverages”. Consumer goods Analysis and five-year forecast for the consumer goods and retail industry throughout the world providing detail on a country by country basis Energy Analysis and five-year forecast for the energy industries throughout the world providing detail on a country by country basis Financial services Analysis and five-year forecast for the financial services industry throughout the world providing detail on a country by country basis Healthcare Analysis and five-year forecast for the healthcare industry throughout the world providing detail on a country by country basis Technology Analysis and five-year forecast for the technology industry throughout the world providing detail on a country by country basis
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Master Template15 Media Enquiries for the Economist Intelligence Unit www.gfs.eiu.com Europe, Middle East & Africa Grayling PR Jennifer Cole Tel: + 44 (0)20 7592 7933 Sophie Kriefman Tel: +44 (0)20 7592 7924 Ravi Sunnak Tel : +44 (0)207 592 7927 Mobile: + 44 (0)7515 974 786 Email: allgraylingukeiu@grayling.comallgraylingukeiu@grayling.com Asia The Consultancy Tom Engel +852 3114 6337 / +852 9577 7106 tengel@consultancy-pr.com.hk Ian Fok +852 3114 6335 / +852 9348 4484 ifok@consultancy-pr.com.hk Rhonda Taylor +852 3114 6335 rtaylor@consultancy-pr.com.hk Americas Grayling New York Ivette Almeida Tel: +(1) 917-302-9946 Ivette.almeida@grayling.com Katarina Wenk-Bodenmiller Tel: +(1) 646-284-9417 Katarina.Wenk-Bodenmiller@grayling.com Australia and New Zealand Cape Public Relations Telephone: (02) 8218 2190 Sara Crowe M: 0437 161916 sara@capepublicrelations.com Luke Roberts M: 0422 855 930 luke@capepublicrelations.com
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