If you had time to peruse the 2012 Morgan Stanley Global Economic Forecast in between munching through the Turkey and the mince pies, you would have noticed it’s a pretty mixed bag but not necessarily fun reading.
Globally, the perception is that growth will be more modest than previously forecast due mainly to poor performance in the USA and stagnation at best (with the risk of recession) in Europe.
Indeed, Europe remains the greatest concern. If, and it is a very big IF, the Eurozone governments manage to achieve a workable degree of full integration, then some of the risks may be averted. At the opposite end of the spectrum the proverbial Euro bucket that has been kicked down the road for so long by politicians may quickly get to the edge of the precipice. Regardless, recession looms large as consumer confidence is low and banks have tightened credit conditions.
The only plus side is that there is an enormous amount of cash sloshing about inside corporate coffers. Whether this will be used imaginatively and within the Eurozone is a different matter.
2012 will be a difficult year even for the UK economy, now firmly outside the Eurozone, due to its high level of public debt and the lack of investment; even in the best case (and unlikely) scenario Morgan Stanley foresees a maximum 1% growth for this country. In Europe, the only surprise may come from Poland, set to perform very well.
So where is the growth going to come from? Well, China, India, Taiwan and Korea will continue to expand, albeit more slowly, and the prospects for many Latin American countries are also excellent. The challenges for all these regions are related mainly to poor infrastructure and their own internal political make-ups. Nevertheless, even a good performance from these regions will be offset by the poor performance of the old world economies. Add to this any environmental risks and we can only hope for a slow growth 2012, rather than a glitzy one. It seems as if the bear is still out of the woods and will be roaming around us for longer.