Rich world economic malaise to endure into 2012: Reuters poll

By Andy Bruce

LONDON (Reuters) – Stagnation is probably the best many of the world’s biggest developed economies can hope for over the next year, with several facing a significant chance of recession, Reuters polls of around 350 economists showed on Thursday.

After a promising start, 2011 has turned into an enormous disappointment for major rich world economies, which have been hobbled by a noxious combination of austerity, debt crises, natural disaster and political impasse.

Backed up by Thursday’s weak trade figures from China, which pointed to profound global economic weakness, the October quarterly survey suggested a bout of weak growth in many G7 economies could extend deep into next year and beyond.

The world economy will grow 3.8 percent in 2011, the poll showed, and just 3.6 percent next year — a stark contrast to the 4.1 percent and 4.3 percent forecasts from the last quarterly survey in July.

But even these tepid growth rates could depend on progress in clearing some of the world’s biggest economic hurdles, like the euro zone sovereign debt crisis and finding ways to boost growth in the United States.

“Rarely has the economic outlook been so sensitive to the decisions of politicians on both sides of the Atlantic,” said Peter Hooper, chief economist at Deutsche Bank Securities, in a research note.

“Whether it is the complexities of reaching unanimous agreement among 17 euro area members regarding the resolution of the sovereign debt crisis, or the increasingly polarized U.S. political scene, political risk may be the greatest source of shocks to the global economy today.”

Euro zone officials on Wednesday indicated they were willing to take at least a small step forward in plans to avert a potentially catastrophic Greek sovereign debt default, by asking banks to accept losses of up to 50 percent on Greek debt holdings.

In the United States, the Senate defeated President Barack Obama’s job creation package in a sign that Washington may be too paralyzed to take major steps to spur the labor market before the 2012 elections.


Canada should see some of the strongest rates of growth compared with its G7 peers this year and next.

Although the outlook for growth has darkened in common with other major markets, its healthy banking sector and commodity-driven economy should give it an edge, with growth of around 2.2 percent seen this year and 2.4 percent in 2012.

But Italy, racked by political fighting, austerity measures and market fears about its ability to finance its debt, looks set to linger in recession well into next year, and will miss government fiscal targets.

U.S. economic growth looks likely to pick up slightly by year-end, although analysts also reined in their expectations and there is a one-in-three chance the world’s biggest economy will enter recession.

“We’ve stepped back from the abyss, the data that we’re getting suggests certainly the economy isn’t in freefall as yet,” said Scott Brown, chief economist at Raymond James.

The euro zone faces a 40 percent chance of another recession as fears mount that the debt crisis will escalate further.

Analysts expect the 17-nation currency bloc to post economic growth of just 0.9 percent next year, after 1.6 percent in 2011.

“Leading indicators point to weaker economic conditions. Sentiment surveys have deteriorated across key sectors of the euro zone economy, against a backdrop of unusually high uncertainty and financial market tensions,” said Ken Wattret at BNP Paribas.

Japan, forced into recession by the March earthquake and tsunami, saw its economic outlook downgraded for a fourth consecutive month thanks partly to the escalating euro zone debt crisis.

“Japan’s exports are seen weakening in October-December due to the economic slowdown in Europe and the U.S., which would affect corporations’ capital spending,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance.

Still, poll respondents predicted growth will pick up to 2.2 percent over the 2012-2013 fiscal year.

(Polling by Reuters Polls Bangalore, Additional reporting and polling by reporters in bureaux in London, New York, Toronto, Paris, Rome, Tokyo, Berlin; Editing by Catherine Evans)

  1. #1 by boh-liao on Friday, 14 October 2011 - 1:22 am

    Wooah, mana CAPTCHA? NO MORE leh, impressive 1 :-D

    NR n UmnoB/BN never think of economic slowdown n recession
    Malaysia is not MALAISE, no problemo, spend, spend, spend
    Also, M’sia going 2 export ISLAMIC SEX n obedient wives, besides Islamic banking
    How many of us knew dat there r such exotic things as Islamic Sex n Jewish Sex?

  2. #2 by monsterball on Friday, 14 October 2011 - 1:32 am

    So what is Malaysia’s actual economic growth…for this year….1.9%?
    To man in the street….who cares…things are getting dearer….profits are down….sales are down.
    It’s a struggle and Najib wants to win confidence from all Malaysians with his most ridiculous unpractical…no logic budget.
    Civil servants are not impressed..with all talk…cannot see one sen more in their pockets.
    Why did Mahathir advise Najib to live out his appointed PMship up to the last day……till 2013?
    Every UMNO b crooks know Malaysians are not going to be fooled by Najib.
    The fact that Mahathir can belittle Najib as much as he likes…shows Najib have no power at all.
    At least Abdullah Bedawi dare to insult Mahathir back…shaming Mahathir back.
    Najib dare not even go against his DPM..who went against him.
    That’s how great Najib is….SHOW DOG…..barking with no more power…just for show.

  3. #3 by yhsiew on Friday, 14 October 2011 - 1:39 am

    There is usually a time-lag of 6 months before the contagion effect from Western countries reaches Malaysia. Najib will probably calls the 13th general election within 6 months from now.

  4. #4 by monsterball on Friday, 14 October 2011 - 1:47 am

    Mahathir’s actual advice to Najib..”Wait out your term…..”
    You think Najib will do that….wait until his term expires?
    That is also saying indirectly…enjoy your freedom till the last day….and plan exile or go to jail?
    What kind of a man Najib is…allowing Mahathir to talk to him like that?
    Anyway.. Najib will not listen.
    It’s do or die for him at 13th GE…and he must do it fast….since giving Malaysians such wonderful news.
    The longer he delays….the worst for him…all exposed again…a liar…talk alot…nothing done.

    • #5 by HJ Angus on Friday, 14 October 2011 - 5:34 am

      “wait out your turn” may be the least BAD scenario for Najib.
      With so much economic TURMOIL, the foreign PR team(paid by taxpayers) should have churned out stories on the measures taken by the government to ride the waves and stay afloat.
      But with this budget, it does seem he is going for broke….and breaking the nation’s financial future in the process.
      I hope that civil servants too can see that. Only a change in government can help Malaysia avoid financial disaster in the future like GREECE.
      This government is incapable of any meaningful reforms.

  5. #6 by Godfather on Friday, 14 October 2011 - 8:35 am

    Putrajaya insists that 5 – 6 pct growth is achievable. All these economists are wrong. The Putrajaya economists are right. All this wealth being thrown around – see how happy the kampung folks are ? Suddenly they can afford a new carpet, a new sofa and a new flatscreen TV.

  6. #7 by Godfather on Friday, 14 October 2011 - 8:36 am

    Reminds me of the “Don’t Worry, Be Happy” song. Make it the new anthem for 1Malaysia, Najib.

  7. #8 by dagen on Friday, 14 October 2011 - 9:03 am

    Dear jib,

    Look at US today. Two lessons. One. Big and strong do not lead to invincibility. Umno may and can indeed fall no matter how and what it does to prop up its status and position. Two. Never ignore the people and gratify the rich only. Rakyat will rise and revolt against the umnoputras and cronyies.

  8. #9 by boh-liao on Friday, 14 October 2011 - 9:16 am

    MMK knows history n how NR’s father left dis world; he also knows NR has his father’s DNA
    By urging NR 2 hang on till 2013, good chance dat NR, with his father’s DNA, KICKS d BUCKET in harness mah, then MMK’s son may ascend d throne faster lor
    But MMK forgets 2 consider FAT LOM, d real PM, in his plot leh – be forewarned

  9. #10 by k1980 on Friday, 14 October 2011 - 11:29 am

    FAT LOM might then remarry mamak’s anak, so both become joint-PMs

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