Columbia International Affairs Online: Working Papers

CIAO DATE: 05/2012

Country Forecast: Global outlook

April 2012

Economist Intelligence Unit


Three years after the global economy reached its lowest point in three-quarters of a century, the recovery remains incomplete and the outlook uncertain. On March 9th 2009, the capitalisation of Morgan Stanley’s global stockmarket index fell to US$26trn, nearly 60% below its 2007 peak. Today, the value of the world’s stockmarkets has yet to return to the pre-crisis level—nor has the confidence of most consumers and businesses. The excesses of the last ten years—the personal debt accumulated early in the last decade and the public debt added during the recession—have saddled many countries with weak economic foundations and little or no resilience to shocks. This has left the US economy, in particular, struggling for a third straight year to lock in faster growth. It has left debt-ravaged Europe in recession and China manoeuvring unsteadily to deflate a bubble. On the brighter side, the global economy will grow again this year and the imbalances that built up over the past decade will continue to unwind. But global growth will be slower this year than last, and a host of risks—from elevated oil prices to war in the Middle East, to the collapse of Europe’s single currency—will weigh on confidence and reduce spending and investment.