Global stagnation

The world recovery ...is in danger of stalling. IMF Economic Counsellor, 23 January 2012.

Global stagnation is generally considered in early 2012 to be a possible short-term prospect, involving a large part of the world economy. Of 30 countries surveyed by the International Monetary Fund, the growth rates of the economies of 20 were classified as "below trend and moderating"; of 8 as "below trend and rising"; and of only 2 as "above trend" According to the World Bank's economists "While contained for the moment, the risk of ... a global crisis, similar in magnitude to the Lehman crisis, remains". The January forecasts by the World Bank and the International Monetary Fund continue to show growth in the world economy, but at a significantly lower rate than in their previous forecasts. Morever, the World Bank forecast embdies the assumption that eurozone policy action will "prevent the sovereign-debt stress of the past months from deteriorating further". (The financial turmoil generated by the intensification of the eurozone crisis had already spread to the developing countries and to other high-income countries, and global growth and world trade had slowed sharply). A downside scenario, in which "one or two small Euro Area economies (equal to about 4 percent of Area GDP) face a serious credit squeeze", reduces GDP in the directly affected economies by 8 or more percent, and that of the world economy by about 1.7 per cent. It also reduces the forecast growth of the advanced economies by about 1.7 per cent, implying slight negative growth in 2012, followed by slight positive growth in 2013.