An important question that you’ve probably asked yourself: If the global economy TOAST or BOAST?
What do these words mean?
As Morgan Stanley explains, TOAST = Tough Oil And Soggy Trade. So that means…
Assumes Brent oil surges to US$140 and stays there and global trade growth falls 5% short of the baseline. Result: a serious bout of stagflation. Global GDP falls about one percentage point below our baseline in both 2011-12 (3.2% and 3.6% respectively). Inflation turns out to be about one percentage point higher (4.8% and 4.5% respectively).
And BOAST = Benign Oil And Surging Trade.
Assumes Brent eases to US$ 90 and stays there and global trade growth is 5% above baseline. Result: Global GDP growth at 4.8% this year (0.6 pp above baseline) and a hefty 5.4% (0.8pp above baseline) in 2012, with China and India displaying double-digit growth rates. Global inflation drops by 0.5pp below baseline.
Click here to enlarge see TOAST/BOAST scenarios for various countries.
[credit provider=”Morgan Stanley”]