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'3.6% growth' for global economy next year
Publication Date : 28-12-2012
The global economy should grow by 3.6 per cent next year, according to Goldman Sachs Asset Management.
Its forecast is a tad above the consensus market tip of 3.5 per cent and is based on a more upbeat view of the developed world, primarily the United States, and India and Russia. It is also more bullish on growth prospects in Mexico and Turkey.
Chairman Jim O'Neill noted: "We would be further above consensus were it not for our view on China's growth, where we remain relatively cautious on the cyclical rebound."
Goldman's 3.6 per cent forecast for next year is in line with the revised prediction of the International Monetary Fund (IMF).
In October, the IMF cut its forecast for global growth next year to 3.6 per cent from 3.9 per cent previously.
IMF managing director Christine Lagarde said that in addition to the debt crisis in Europe, a "fiscal cliff" of expiring tax provisions and spending cuts in the US is creating headwinds for the global economy.
Goldman identified four key global risks for the next year or two: the European debt crisis, the US fiscal cliff, Japan policy and growth surprises, and Middle Eastern tensions and oil prices.
It said risks that have dominated talk this year, notably the euro crisis and the US economy, will "likely remain on our radars".
Goldman is extra bullish on the US economy, tipping 2.3 per cent growth next year versus a consensus of 1.9 per cent.
Data on the labour market, consumer confidence, some housing indicators and trade have all been surprisingly positive in recent weeks, it noted.
"If a credible fiscal deal is reached in the next couple of months, which is our base case, 2013 could start on an encouraging note," it added.
Goldman believes crisis-hit Europe can deliver moderately positive growth of 0.2 per cent next year, above the consensus forecast of flat growth.
It expects the German economy to rally in the first quarter of next year on the back of domestic demand and exports, and tips that Italy could surprise, given the low starting base and the negative sentiment surrounding it.
Goldman added: "The probability of an extreme outcome in the euro area has been reduced... the main source of risks in Europe for next year will revolve around reform implementation."
As for China, it forecast 7.9 per cent growth next year, lower than the 8.1 per cent consensus.
"Instead of focusing on the quality of growth, Chinese policymakers will likely continue rebalancing the economy towards a slower, more sustainable growth model driven by private consumption," it noted.
Goldman is also upbeat about some equity markets next year.
It noted: "We believe the Chinese equity market could finally rally, and equities in Russia, Brazil and Italy could also perform well, particularly if growth surprises on the upside."
Meanwhile, ANZ remains bullish on South-east Asian growth prospects, tipping that the strong expansion of recent years will carry on into next year.
ANZ believes the region is not overheating, and policy credibility has improved, with headline and core inflation being "well-contained".
The region also lacks large ma-croeconomic or financial imbalances, and has a good deal of domestic demand, which will remain largely unaffected by global headwinds, it noted.
The ANZ research team added: "We expect less drama and more growth out of the region compared to other regional heavyweights such as India or China. This should sustain reasonably strong asset market performance."