Outlook 2012

  The year 2011 is taking its leave in the midst of a sense of unease, giving rise to great concerns regarding the course of the economy in 2012. The year that's ending has confirmed that the recovery will be slower and more irregular than desired due to the complications arising in advanced economies. In emerging economies, on the other hand, although activity has slowed up slightly and this trend might last into the coming year, the rate of growth will still easily exceed 5%.

  The loss of momentum in developed economies in 2011 was partly to be expected due to the nature of the 2008-2009 economic and financial crisis and the policies applied to overcome it. On the one hand, a recession largely caused by excessive debt usually gives rise to a slower, weaker exit from this recession. On the other, it was inevitable that the withdrawal of the substantial fiscal, monetary and financial policies employed to tackle the biggest recession for several decades would have a detrimental effect on subsequent growth, unless private sector demand could quickly replace the action taken by the public sector. However, four factors have helped to hinder the recovery of advanced economies, which in the first quarter of 2011 were still enjoying notable rates of growth.

  Firstly, the private sector is taking over from the public sector as the economic driving force much more slowly than expected. Secondly, the earthquake and subsequent tsunami which, in March, affected the north-east of Japan led to a significant interruption in supply chains, particularly in automobiles and electronic components, which was felt globally. Thirdly, rising commodity prices in 2009 and 2010, after the lows recorded at the end of 2008, reached their peak at the beginning of 2011, thereby complicating the recovery of importing countries; in spite of their subsequent fall, the prices of the main commodities are still above the average for 2010. Lastly, Europe's sovereign debt crisis, which erupted at the end of 2009 and which, in 2010, saw the bail-out of two EU member states, has not only failed to improve in 2011 but has even spread and got worse, raising worrying questions about the capacity of European institutions to orchestrate the necessary remedies to stabilize the situation.

  Within this context, business and consumer confidence has plummeted and financial markets have suffered serious setbacks. The dilemma of economic policy continues to be how to support the recovery in activity whilst also redressing fiscal imbalances. In the United States, the budget dispute continues to threaten stability but we expect growth to remain at around 2% in 2012. The great uncertainty lies in Europe, which is facing what might still turn out to be a double dip recession. The adjustment policies adopted to a greater or lesser extent depending on the country are inevitably affecting the purchasing power of households and of the public sector. The worsening of the sovereign debt crisis and the perception of the lack of a route map to overcome this are deterring private investment. Financial unrest, the tightening of financing terms and new regulatory requirements are hindering the normal flow of credit. All elements therefore seem to be in place for the debt crisis to end up affecting and contaminating the real economy, leading to a highly unfavourable environment for Europe's economy in 2012.

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