THE WORLD SLOWS DOWN
"A new and dangerous phase" is opening up for the world economy, which "has weakened significantly, while confidence has dropped significantly and the risks of a slowdown have increased". Furthermore, volatility has increased “drastically”, mainly due to the Eurozone crisis. In short, "the expansion should continue, but in a weak and irregular way". This is the opinion of the International Monetary Fund, which in its latest World Economic Outlook cut its estimates of world growth to +4% in both 2011 and 2012 (respectively 0,3 and 0,5% less than the estimates of June). Growth will be "strongest in some advanced economies, especially those with closest ties to Asia".
IN THE EUROZONE GOVERNMENTS DO NOT CONTROL THE CRISIS
By narrowing the focus on the Eurozone, the slowdown in the economy will be even more evident, recording +1,6% in 2011 and +1,1% in 2012 (0,4 and 0,6% less than forecast three months ago). A sign that the Eurozone crisis "is getting out of government control, despite the decisive political response given on 21 July". The financial plans put in place by peripheral countries "are rightly ambitious", but their main task should be to "find the right balance between fiscal consolidation and structural reforms". The most worrying aspect according to the Washington institute is that the sovereign risk premium "has grown significantly in Belgium, Italy, Spain and, to a lesser extent, France". This brings further volatility to the markets and "high risks to financial stability". For this reason, the ECB "must continue to intervene vigorously to maintain order on the markets".
USA TOWARDS NEW BLOWS
Things are no better for the US, which according to the IMF "have already weakened and could suffer further shocks". The cut in GDP estimates is also coming for Americans: growth will be 1,5% in 2011 and 1,8% in 2012 (1 and 0,9% less than the June estimates) . For all these reasons, the Fund's technicians argue that "it is not a possible option to postpone consolidation actions in the short term", indeed it is a priority for advanced economies, especially the United States, "to apply credible and well-calibrated plans also for the medium-term, focused on long-term debt sustainability”, otherwise all major economies “could slide back into recession”.
INFLATION AND UNEMPLOYMENT
Returning to the economic data, according to IMF estimates, inflation in the United States should settle at 3% this year and 1,2% next year, while for the Eurozone we are talking about 2,5% in 2011 and 1,5% in 2012. As for the unemployment rate in advanced economies, it is expected to stand at 7,9% this year and in 2012. Low wages and relatively low costs “have supported corporate profits – yes still reads in the World Economic Outlook – but they have not directly benefited families and the propensity to consume”.
