Underlying Economic Conditions

The world economy remains on a growth path. According to the International Monetary Fund (IMF), global growth will reach 4.4 percent in 2011. For 2012, the IMF predicts 4.5 percent. Emerging markets will expand at a faster pace than advanced economies. Rising gross capital investments are one of the factors behind the uptrend. In contrast, high sovereign-debt levels in certain countries have prompted budget austerity that could hold back economic progress.

US Economy to Grow More Slowly in 2011

In the USA, economic expansion will probably be slower in 2011 than last year. The Organisation for Economic Co-Operation and Development (OECD) expects growth of 2.2 percent there. High unemployment still dampens consumer spending. According to OECD estimates, GDP will be stronger in 2012, with growth forecast at 3.1 percent.

GDP Trends in 2011 GDP Trends in 2011 (bar chart)

Sources – worldwide: IMF; USA: OECD; Asia: IMF; China: ADB; India: ADB; Japan: ADB;
Europe: OECD; Germany: OECD
(Dec. 2010, Jan. 2011)

Asia Remains a Growth Driver

Asia will again deliver much higher growth rates than all other regions over the next two years. The IMF forecasts 8.4-percent growth there in 2011. The large economies of China and India will continue to expand. The Asian Development Bank (ADB) forecasts 8.7-percent growth for India in 2011. Expansion in China will be slightly below 2010’s level due to the impact of more restrictive monetary and financial policies. According to ADB projections, China will achieve 9.1-percent growth. In 2012, the IMF predicts 9.5 percent. Japan’s economy will expand by 1.7 percent in 2011 and 1.3 percent in 2012.

Pace of European Growth Unchanged in 2011

The OECD anticipates European growth of 1.7 percent in 2011, the same level as in the previous year, with 2.0 percent forecast for 2012. The German economy will expand more vigorously. Based on OECD figures, Germany will post 2.5-percent growth in 2011, its economy returning to pre-crisis levels of activity. Thanks to falling unemployment, consumer spending will bolster growth. German GDP is forecast to grow 2.0 percent in 2012.