Risk of Global Slowdown is High

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From Gerdau Market Outlook:

GDP growth forecast for 2012 and 2013. The IMF released its quarterly World Economic Outlook (WEO) this week. The 226 page report warns that there is considerable slack in many advanced economies, so much so that the risk for a global slowdown is “alarmingly high”. The outlook is expected to remain sluggish in advanced but still comparatively strong in developing economies. Growth rates in 2012 and 2013 are projected to be US 2.2% and 2.1%, Canada 1.9% and 2.0% ( Table 1 ). The probability of global growth falling to < 2% (recessionary level) now stands at 17%. The WEO growth model indicates recession probability of: 15% in the USA, 25% in Japan and 80% in the Euro area. Concerns are the sovereign debt crisis in the euro area and the “fiscal cliff” in the U.S. Failure by congress to address the pending tax hikes and spending cuts would take $600bn out of the economy in 2013 and push the US into a full-fledged recession.

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