The global economy is expected to grow 2.4 per cent this year, according to Citi’a latest global economic outlook report. This is revised up from 2.3 per cent growth forecast last month. The 2013 growth forecast stayed unchanged at 3 per cent.While the increase in 2012 forecast is small, it is a change from their repeated downgrades since early 2011.
Here are the main drivers of the revision:
- Euro area GDP forecast is revised up by 0.2 points to -1.3 per cent for 2012. The change is attributed to better-than-expected economic indicators in the start of 2012, and a smaller-than-expected contraction in the fourth quarter.
- Japan’s GDP forecast is revised to 1.2 per cent in 2012, up from 1 per cent in January. The stabilisation in the economies of some of Japan’s biggest trading partners and the recent yen depreciation were behind the revision.
- Mexico’s GDP is now expected to increase 3.3 per cent this year, up from previous projections of 3 per cent growth. The change is attributed to better demand conditions in the U.S. and stronger private consumption domestically.
Citi maintained its 2 per cent GDP growth forecast for the U.S., which continues to be bolstered by pent-up demand, rising employment and an accommodative monetary policy. They anticipate extra Fed support in the form of MBS purchases if growth slows or inflation drops. Meanwhile, growth in China is expected to slow to 8 per cent in the first half of the year, followed by a rebound in the second half.
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