Top 10 Economic Predictions for 2012

Top 10 Economic Predictions for 2012

Major 2011 events include the Arab revolutions in spring, followed by major financial disorders in Europe, and minimal progress on sustainability issues through the Durban summit.

These major elements are just a few factors impacting the world under the new global model we all live in. Beyond IT trends, no doubt that all these domestic and international events we’re hearing about will have a significant macro-economic impact in 2012. If the result is a decrease in worldwide growth in 2012, the main question is how important will this be. Let’s have a look at what could be the Top 10 Predictions of Economics in 2012

1. “The United States will probably avoid a recession”. Domestic risks have decreased, growth momentum has somewhat picked-up but fiscal pressure, housing market difficulties and Eurozone sovereign-debt crisis are strong issues. GDP growth is planned at 1.5-2%

2. “The Eurozone is headed for a second dip”. The Eurozone will experience a recession, mild or deep depending on how fast and strong measures are executed. Fiscal austerity, tight credits and very low confidence will not favor consumption and investments

3. “Asia will continue to outpace the rest of the world”. Regional growth, around 5.5%, will remain the strongest in the world. Japan rebounds after its earthquake, Chinese exports are strong but a housing downturn is risky, while many Asian governments decrease inflation

4. “Growth in other emerging markets will hold up, for the most part”. Central Europe will be hit the most by decreasing Western Europe exports. Latin America, the Middle East and Africa will be more impacted by the situations in the United States and China

5. “Commodity prices will (mostly) move sideways”. Prices are pulled down by weaker global demand and pushed up by limited capacity and strong growth in some emerging countries. It’s expected that prices will evolve around current levels

6. “Inflation will diminish almost everywhere”. Limited growth and lower commodity prices will drive inflation down. This will be more marked in developed economies due to excess capacity, more limited in emerging countries which will benefit from declining food prices

7. “Monetary policy will either be on hold or ease further”. Decreasing inflation and limited growth perspective are conducting all central banks to keep their policy rates near zero (United States), stop rising (India), or lower interest rates (Europe)

8. “Fiscal policy is set to become even tighter in the United States and Europe”. In the USA, Federal Government expenses will decrease, where in Europe, several countries have already decided on deep austerity measures or are under strong pressure to cut budget deficits

9. “With the exception of the Euro, the dollar will keep sliding”. The high deficit, weak growth, and low-interest rates should favor dollar sliding against emerging markets currencies. But it will likely appreciate against the euro, in a measured way if the European crisis remains limited

10. “Most of the risks to the outlook are on the downside”. The first risk is a possible financial meltdown in the Eurozone, especially if a major country would face default. The other would be a big decrease in Chinese growth, fueled by a bursting real estate

Impact for IT sector: This is obviously not macro-economic good news for consumer and business spending. It will impact IT market, with customers selecting their investments even more cautiously, and some verticals like public sectors will suffer even more. From a regional perspective, it can be expected that most vendors will keep increasing their efforts in emerging countries, particularly in China as it has become the second largest economy or Russia has it has huge energy reserves.

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Ali is a seasoned business leader and executive with 10 years of diverse experience in Digital and Commercial areas of IT industry. He gained broad experience in managing on-demand (cloud) and on-premise offerings in both Public and Private sectors in Turkey and UK&I.

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Ali Rıza Babaoğlan | All Rights Reserved, part of Grow in EMEA Investment Advisory group.