This is what will happen to the global economy for the next three years

"Global growth prospects are worsening, reflecting the euro area crisis and emerging market slowdown," wrote Citi Chief Economist Willem Buiter.

Citi recently published its 80-page Global Economic Outlook and Strategy report, which provides up-to-date commentary and forecasts for the major economies covered by the bank's army of economists.

In it, Citi slashed its global growth outlook:

"Global growth prospects are worsening, reflecting the euro area crisis and emerging market slowdown," wrote Citi Chief Economist Willem Buiter.  "We now expect global growth of 2.6% this year and 2.7% in 2013, down by 0.1% for 2012 and down by 0.2% for 2013 from last month."

Buiter's team breaks down what's going on in each economy.  We pulled the highlights.

North America:

The United States will experience slow 2% growth, but no slower

GDP Growth Forecast

  • 2012: 2.1%
  • 2013: 2.0%
  • 2014: 3.5%
  • 2015: 3.5%

Citi's Robert DiClementi notes that recent economic data has been disappointing.  Nevertheless, the U.S. economy is being bolstered by low gas prices, improving housing indicators and an easy Federal Reserve.  Citi assumes the U.S. will "avoid a fiscal calamity in 2013."

Source: Citi

Canada's business and consumer confidence are strong

GDP Growth Forecast

  • 2012: 2.0%
  • 2013: 2.2%
  • 2014: 2.7%
  • 2015: 3.2%

Citi's Dana Peterson notes that despite tighter fiscal policies, confidence is strong, the housing market is up, and consumer spending is robust.

Source: Citi

Mexico's domestic demand is strong

GDP Growth Forecast

  • 2012: 3.9%
  • 2013: 3.8%
  • 2014: 3.5%
  • 2015: 3.6%

Citi's Sergio Luna Martinez notes that external demand is slowing, but private consumption is resilient.

Source: Citi

South America:

Brazil's central bank could soon step in to stimulate growth
 

GDP Growth Forecast

  • 2012: 2.3%
  • 2013: 4.5%
  • 2014: 4.5%
  • 2015: 4.5%

Citi's Marcelo Kfoury recently slashed his growth estimate for Brazil, but he expects growth to accelerate again quickly.  This could be helped by an interest rate cut.

Source: Citi

Argentina is looking at stagflation

GDP Growth Forecast

  • 2012: 3.0%
  • 2013: 3.0%
  • 2014: 2.0%
  • 2015: 2.0%

Citi's Joaquin Cottani sees a long period of low growth and high inflation.  CPI stood at a staggering 23.9 percent in May.

Source: Citi

Venezuela faces a big problem if oil prices stay low

GDP Growth Forecast

  • 2012: 5.0%
  • 2013: 3.5%
  • 2014: 4.0%
  • 2015: 3.0%

From Citi's Munir Jalli: "Although everything seems to be about politics these days in Venezuela, some dark clouds are forming in the economic outlook as oil prices have been stuck below US$100/barrel, reducing oil revenues."

Source: Citi

Western Europe: 

Germany's solid domestic demand will keep it out of recession

GDP Growth Forecast

  • 2012: 1.2%
  • 2013: 0.9%
  • 2014: 1.0%
  • 2015: 1.3%

Citi's Jurgen Michaels recently slashed Germany's growth forecast due to falling business sentiment.  However, strength in domestic demand is offsetting weakness in its exports.

Source: Citi

France's increasing tax rates will be a drag on the economy

GDP Growth Forecast

  • 2012: -0.1%
  • 2013: -0.2%
  • 2014: 0.9%
  • 2015: 1.2%

Citi's Guillaume Menuet notes that the government's strategy to meet deficit targets relies on higher taxes.  However, he thinks France will nevertheless miss those targets.

Source: Citi

Italy's unemployment rate will remain high and household consumption will stay weak for a while

GDP Growth Forecast

  • 2012: -2.6%
  • 2013: -2.0%
  • 2014: 0.1%
  • 2015: 0.9%

Citi's Jurgen Michels thinks weak consumption and high unemployment rates will persist though 2013.  "We expected Italy to request external support before the end of this year or in early 2013," he wrote.

Source: Citi

Spain's bank bail-out will only offer a little help

GDP Growth Forecast

  • 2012: -2.1%
  • 2013: -3.1%
  • 2014: 0.4%
  • 2015: 1.9%

Citi's Ebrahim Rahbari recently upped his 2012 growth outlook following the application for the bank bail-out.  But it won't end there.  He expects Spain to accept a "troika bail-out with sovereign conditionality to follow the bank bail-out in due course."

Source: Citi

Greece won't be able to get bail-outs forever. An exit from the euro is likely

GDP Growth Forecast

  • 2012: -7.5%
  • 2013: -10.1%
  • 2014: -1.1%
  • 2015: 4.5%

Citi's Jurgen Michels sees a 50-75 percent chance that Greece exits the euro.  Greece will eventually get its next bail out.  But eventually, Greece won't be able to meet the requirements to secure bail-out funds.

Source: Citi

Ireland's economy will disappoint everyone and contract in 2012

GDP Growth Forecast

  • 2012: -1.0%
  • 2013: 0.4%
  • 2014: 2.0%
  • 2015: 2.1%

Citi's Michael Saunders sees Ireland contracting in 2012, which is much more bearish than the government's and IMF's forecasts for growth.  Saunders sees a second bail out coming.

Source: Citi

Portugal's outlook continues to deteriorate on dimming trade prospects

 
GDP Growth Forecast
 
  • 2012: -4.6%
  • 2013: -5.5%
  • 2014: -0.6%
  • 2015: 1.5%

Citi's Jurgen Michels slashed his growth outlook on Portugal due to weakening trade prospects.  He expects another bail out in Q3 or Q4.

Source: Citi

The Netherlands' consumer sentiment and housing indicators signal weakness through 2013


GDP Growth Forecast
  • 2012: -1.5%
  • 2013: -0.6%
  • 2014: 1.0%
  • 2015: 1.2%

Citi's Jurgen Michels sees a value-added tax (VAT) rate hike coming that will help the country get closer to its GDP deficit target.  However, sentiment measures and housing metrics look unfavorable.

Source: Citi

Belgium's business confidence is deteriorating and its housing market may be in a bubble

GDP Growth Forecast

  • 2012: 0.0%
  • 2013: -0.3%
  • 2014: 0.8%
  • 2015: 1.5%

Citi's Guillaume Menuet expects the Belgium economy to get his by fiscal tightening.  Business confidence is declining and the housing market may be 15 percent overvalued.

Source: Citi

The UK's retail sales are weak and credit remains tight

GDP Growth Forecast

  • 2012: -0.4%
  • 2013: 0.6%
  • 2014: 1.1%
  • 2015: 1.7%

Citi's Michael Saunders recently cuts his forecast for the UK due to weak retail sales, industrial production, and exports.  Also, debt levels remain high and credit is tight.

Source: Citi

Switzerland's exports are getting crushed by the strong franc, but consumer spending is robust

GDP Growth Forecast

  • 2012: 1.4%
  • 2013: 0.8%
  • 2014: 1.1%
  • 2015: 1.1%

Citi's Michael Saunders recently lifted his growth forecast on Switzerland thanks to improvement in sentiment surveys.  The strong Swiss franc has been bad for exports, but low interest rates are helping consumer spending.

Source: Citi

Sweden's exports are weak, but it's fiscal and monetary policies are expansionary

GDP Growth Forecast

  • 2012: 0.4%
  • 2013: 1.9%
  • 2014: 2.4%
  • 2015: 2.5%

Citi's Tina mortenson notes that Sweden's exports are weakening, consumer spending is slow, and the housing market is softening.  However, she expects the government to introduce expansionary policies and the Riksbank (central bank) to cut rates.

Source: Citi

Denmark's currency is surging and interest rates are about to go negative

GDP Growth Forecast

  • 2012: 0.7%
  • 2013: 1.3%
  • 2014: 1.6%
  • 2015: 1.7%

Citi's Tina Mortensen highlights the incredible amount of buying in the Danish kroner, which many consider to be a safe-haven currency.  "There is a real possibility of rates going negative," she writes.

Source: Citi

Norway's oil sector is booming

GDP Growth Forecast

  • 2012: 3.0%
  • 2013: 2.9%
  • 2014: 2.7%
  • 2015: 2.7%

Citi's Tina Mortenson notes that the oil sector is booming, spending is increasing, jobs are looking good, and incomes are gaining.

Source: Citi

Eastern Europe:

Russia's consumer is losing steam

GDP Growth Forecast

  • 2012: 3.5%
  • 2013: 4.0%
  • 2014: 4.1%
  • 2015: 4.0%

David Lubin notes that the heated consumer spending surrounding the presidential election is wearing off.  Also, Russia's economy is largely tied to oil prices, which have been well off of their highs.

Source: Citi

Turkey's economy is also suffering from lower oil prices

GDP Growth Forecast

  • 2012: 2.5%
  • 2013: 4.3%
  • 2014: 4.6%
  • 2015: 4.6%

Citi's Ilker Domac recently revised his growth estimate for Turkey due to lower oil prices.  However, low oil prices are credited for causing the currency (lira) to strengthen.

Source: Citi

Poland private spending is shrinking and exports are getting hurt by the euro crisis

  • 2012: 2.7%
  • 2013: 2.4%
  • 2014: 3.1%
  • 2015: 3.4%

Citi's Plotr Kallaz notes growth is decelerating in Poland. Private spending is slowing, the government is cutting back on infrastructure spending, and exports are shrinking due to the euro zone crisis.

Source: Citi

Asia:

Japan is slowing due to China's deceleration

GDP Growth Forecast

  • 2012: 2.7%
  • 2013: 1.4%
  • 2014: 1.5%
  • 2015: 1.5%

Citi's Kiichi Murashima notes that post-earthquake reconstruction and stimulus is tapering.  The export driven economy will suffer due to its heavy exposure to a slowing China.

Source: Citi

China is slowing, but it has the flexibility and policy tools to keep growth right where it wants

GDP Growth Forecast

  • 2012: 7.8%
  • 2013: 7.9%
  • 2014: 7.6%
  • 2015: 7.3%

Citi's Minggao Shen sees growth accelerating in the second half of this year.  The big concern is the sovereign debt crisis in Europe.  However, China is expected to use its financial flexibility to roll out more interest rate cuts and reserve requirement ratio reductions.

Source: Citi

India's growth is slowing and inflation is high

GDP Growth Forecast

  • 2012: 6.4%
  • 2013: 6.9%
  • 2014: 7.1%
  • 2015: 7.3%

Citi's Rohini Malkani notes that GDP growth has been disappointing. Unfortunately, India's central bank is unwilling to cut rates because inflation continues to be high.

Source: Citi

Korea is getting hit by slowdowns in Europe and China

GDP Growth Forecast

  • 2012: 2.8%
  • 2013: 3.6%
  • 2014: 3.8%
  • 2015: 4.0%

Citi's Jaechul Chang recently slashed his growth estimate for the export-driven economy due to slowing in both China and Europe.

Source: Citi

Indonesia trade balance has worsened as commodity prices have fallen

GDP Growth Forecast

  • 2012: 6.1%
  • 2013: 6.3%
  • 2014: 6.7%
  • 2015: 6.5%

Citi's Heimi Arman notes that falling commodity prices, especially for coal, has caused its trade balance to worsen.

Source: Citi

Australia's mining sector is booming, but it's housing market is in recession

GDP Growth Forecast

  • 2012: 3.7%
  • 2013: 3.4%
  • 2014: 3.8%
  • 2015: 3.8%

Citi's Paul Brennan forecasts slowing among Australia's trade partners.  Also, the housing market is showing recessionary levels of activity.  Nevertheless, it's mining sector is still surging.

Source: Citi

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