2012 brings global economic cooling

The first batch of macroeconomic forecasts from the world's largest investment banks in 2012 continues the cycle of worsening estimates of expected economic growth that began in the second half of 2011. The coming year was marked by “economic uncertainty of epic proportions.” At the same time, a recession in the EU, as well as a further slowdown in the economies of the United States and the largest developing countries, including the Russian Federation, is recognized by analysts as inevitable.

The authors of the HSBC Bank report “The Economy is Losing Its Footing,” published yesterday, emphasize that last year’s moderately optimistic forecasts of politicians and economists turned out to be wrong. “Even before the eurozone crisis reached its boiling point, global economic growth had begun to decline. The US and UK performed below expectations. Fears of excessive inflation in emerging markets have been replaced by concerns about too weak growth, especially in China,” they remind.

Agreeing with HSBC analysts, Goldman Sachs chief economist Jan Hartsius, who launched the bank's 2012-13 Global Economic Outlook yesterday, said: “Our Outlook comes at a time of enormous uncertainty about the development of the economy and financial markets, particularly in the eurozone. The ongoing shocks caused by the sovereign debt crisis in the region and the policy response are likely to be fundamental to the global economic outlook over the next few months.”

Meanwhile, analysts still assess the degree of shocks that the world economy may face in the coming year differently, agreeing on one thing: a recession in the EU is inevitable regardless of the future fate of the single European currency and the slowdown in the economies of the USA, China and other major developing countries . Goldman Sachs cut its forecast for global economic growth to 3% in 2012-13, suggesting "fairly little difference between frontrunners and underdogs." Goldman Sachs estimates are close to IMF expectations. Yesterday, the head of the fund, Christine Lagarde, said that the forecast for global economic growth in 2012 will be lowered from the current 4%.

Against this background, HSBC's expectations look most pessimistic. The bank revised the global GDP growth rate in 2012 from 2.6% (October 2011) to 1.9%. Economic growth in Russia will not exceed 3% against the background of accelerating inflation to 7% (according to Rosstat, in 2011 the growth in consumer prices was at the level of 6.1%). At the same time, the global economic slowdown may be the most painful for Russia among other BRIC countries. The current model of economic growth, based on domestic consumption and investment, “is based on processing oil windfall profits through fiscal and credit channels, which can only work if such profits continue to rise due to higher oil prices. Without this growth, banks will have to curb credit growth, which will lead to lower consumption growth,” HSBC said, noting that all fiscal stimulus to accelerate economic growth has been exhausted.

The acceleration of inflation against the background of an increase in regulated tariffs in the second half of 2012 and a negative base effect (core inflation in 2011, reflecting high inflation expectations and the weakening of fiscal and monetary policy, continued to grow, reaching 7%) will be an additional factor limiting the growth of private consumption. And political uncertainty may “freeze” the implementation of large private investment projects in the Russian Federation.

Composite indicators of the leading PMI index (December 2011), calculated for the Russian manufacturing industry by Markit and HSBC, indicate a sharp drop in export orders in December and a continued increase in production “to stock”. The further deterioration in external demand expected by analysts clearly worsens this picture. One of the main questions posed by HSBC, and the answer that would allow us to more adequately assess the coming economic shocks, including for Russia, is this: how helpless will politicians and decision-makers be in the current situation?

Alexey Shapovalov

Analysts are haunted by the specter of recession