Slowly but surely global growth estimates have been ratcheted down. Courtesy of Google Translate from an Italian news site, please consider IMF estimates two years of recession for Italy
Deep red for the Italian economy in the next two years. Against the background of a global recovery stalled, slowed by the crisis in the eurozone in particular, Italy is preparing to reach out to two years of recession in 2012 and 2013. The cold shower comes from the International Monetary Fund put in hand as usual to their predictions gave a general scissor kick to the estimates of growth around the world.
Last update at the World Economic Outlook that the Ansa news agency is able to anticipate its spread before the official next Tuesday, the IMF finds in the euro area’s main patient who staggers a little and infects all international economies. “The global recovery is threatened by the growing tensions in the euro area,” considered the “main reason” the deterioration of economic prospects.
And it is complemented and intertwined “the financial fragility elsewhere.” The Fund therefore warns that the downside risks have escalated. So economists in Washington have been forced to make a clean break with all the statistics and this in large part because “it is expected that the euro area economy will end up in a mild recession in 2012.”
World growth will be just 3.3% this year and 4% next, with a downward revision, respectively, 0.7 and 0.5 percentage points. For the whole area of the single currency, however, is expected to decline in GDP of 0.5% in 2012, with a downward revision of 1.6 percentage points. Growth will return in 2013 instead, but it will be only 0.8%.
But far worse is the Italian situation. For the contraction in GDP this year will exceed even the 2% to 2.2%, with a cut by 2 ½ points compared with the estimates of last September. And the plus sign will not be able to come back even in 2013, when the GDP will drop by 0.3%.
European Recession Neither Mild Nor Short
Notice how the estimate from Europe went from growth to a “mild recession”.
The recession will not be mild in Italy (the third largest Eurozone country), Spain, Portugal, or Greece. In that group all but Italy face sure depression and Italy is likely headed there. For further discussion, please see Money Supply Figures Suggests Italy Headed Into Depression; Non-Performing Spanish Loans Hit 134 Billion Euros, 7.51% of All Loans, Highest in 17 Years; Eurozone Unemployment Charts.
Combined with slowing in China, a recession in Australia, and a recession in the UK, the odds that Germany bucks the trend are extremely slim.
The odds are high the US enters a recession as well. Thus I expect the IMF to lower growth estimates again soon.
Mike “Mish” Shedlock
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