What does 2012 hold in store for the world economy? Let us start by looking at the battered high-income countries. Is there a good reason to expect healthy recoveries? Not really. The outcome in the eurozone might be a disaster that spreads around the world. Even the US recovery is likely to be fragile. The shadow cast by events before 2007 passes slowly.
The December consensus of forecasts is gloomy (see chart). The most recent views on likely growth this year are far below those expected a year ago. This is particularly true for the eurozone, which is expected to fall into recession. The economies of Italy and Spain are expected to contract, while France and Germany are expected to produce negligible growth. The UK is forecast to be in the same state as the eurozone's two largest members. Only Japan and the US are forecast to show anything close to reasonable economic growth this year. In the case of the US, growth was forecast at 2.1 per cent in December, up from 1.9 per cent in November.
