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Citi’s economists forecast recession and expansion in a turbulent world

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Citi’s economists are forecasting slower global growth, a recession in the Euro Area and further sovereign debt downgrades over the next two to three quarters.

In a report released today – “Prospects for Economies and Financial Markets in 2012 and Beyond” – Citi’s economists also forecast a resurgence of global political risk and a lengthy period of ultra low nominal and negative real interest rates in major industrial economies.

They expect the Euro to survive. “Our forecast is that the Euro crisis escalates and then is contained and mitigated somewhat by policy responses,” says Willem Buiter, Citi’s Chief economist. “However, that forecast is subject to considerable risks, most of them on the downside. On the upside, it is just about possible that the ECB and creditor nations may be willing to commit themselves publicly to provide extraordinarily large assistance early enough to prevent sovereign spreads widening further, although we regard this as rather unlikely.”

Citi still expects positive global growth, driven by emerging economies, but revised its forecast down again to a 2.5% advance in 2012 from a previous estimate of 3%.
 

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