New macro forecast: No repeat of 2008 despite EMU crisis
(Thomson Reuters ONE) -
The situation in the eurozone is an ongoing cliff-hanger and will cause some
spill-over effects, both real and financial, in other parts of the global
economy. But the overall global situation is different from 2008. The US is now
in recovery and helps stabilise the global economy. The credit outlook in the
eurozone is much worse than in 2008 but it is much better in the US and in Asia.
Also, monetary easing is already under way in emerging economies, unlike in
2008 when policies were too tight for too long.
The recovery in the US continues but growth is modest in a historical context.
Economic activity is mainly supported by exports and investments. Despite
stubbornly high unemployment, core inflation, which reflects rising rent levels,
will remain within the Federal Reserve's preferred inflation range.
Nevertheless, we expect that the Fed will live up to its commitment to keep
rates unchanged until mid-2013. By contrast, we do not expect another round with
quantitative easing.
In a global perspective, the eurozone is currently the biggest source of
concern. We had already a pessimistic view of the prospects for this region in
August, and the absence of real measures to solve the crisis warrant further
downward revisions. We lower our growth forecasts accordingly. In order for a
serious recession to be avoided, the ECB has to step in. The northern part of
the eurozone will barely avoid a recession, while the southern part will be
unable to do so. The pipeline of budget cuts and reduced bank lending will be
too heavy a burden.
The ECB will gradually have to soften its stance. In the end, it is highly
likely that the Central Bank will have to make large-scale purchases of
government bonds to help the troubled economies. Although the euro will still
remain the currency of the eurozone, it is likely to weaken against other
currencies. Relative cost and price levels will have to be adjusted downwards
for the region to compete in international markets. The fear that the eurozone
eventually will unravel completely will remain a concern in financial markets
and is another argument in favour of the euro trading lower.
The UK is facing strong headwinds. This is primarily a reflection of the
eurozone crisis, but fiscal tightening and the related domestic demand weakness
also impact economic activity negatively. The authorities are facing huge
challenges in seeking to balance growth, reduce the size of the public sector
and cut public indebtedness. Policymakers deserve credit for their handling of
the crisis during 2008-09. Against this background and given that it has room to
act independently, the UK looks like a safe haven.
Emerging markets are still the main driver in a global context. So far, they
have proven quite resilient to the massive problems in Europe and unusually weak
growth in the US. We see few signs of serious contagion. Nevertheless, there are
signs of moderate slowdown in many countries. Spearheaded by China, Asia is no
doubt the most buoyant region in the emerging universe, but there are still
limits as to what extent China can support global activity. Latin America is
also in a relatively good shape. Our main concern is Eastern Europe, with its
close links to the eurozone.
The recovery in Sweden is running out of steam but its economy is in many ways
much better prepared than its regional peers. Nevertheless, firms and households
have become more pessimistic, with regard to both exports and financial markets.
Fortunately, there are important domestic strengths. However, these may only
partly soften the blow. Given the deterioration in economic prospects, we think
that the Riksbank gradually will change gear and ease rates.
Jan Häggström, Chief Economist
For further information: +46 8 701 10 97, +46 70 761 4366
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Source: Handelsbanken via Thomson Reuters ONE
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Datum: 08.12.2011 - 10:01 Uhr
Sprache: Deutsch
News-ID 94997
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