Global Economic Outlook: “Bumpy Road Ahead”

From Canadian law firm Bennett Jones, a comprehensive look at key indicators of economic growth in North America and around the globe. Their prognosis? “Bumpy road ahead:”

“Since our spring 2012 economic outlook, the crisis in the eurozone has worsened and growth in the emerging economies has fallen more than expected, with negative spillovers on the United States and Canada. Uncertainty about future policies and their effects remains pervasive and the risks to growth in the short term are still predominantly on the downside. Under the assumption that political compromises are achieved and major policy failures are avoided, advanced economies will experience subdued growth and emerging market economies (EMEs) a relatively robust expansion over the next two years, while commodity prices should remain at roughly current levels but experience greater volatility. The legacy effects of the financial crisis and recession continue to weigh on the global recovery through private-sector deleveraging and fiscal consolidation. However, a diminution of deleveraging, as private debt falls to more prudent levels relative to income and government deficits are contained, sets the stage for better growth in advanced economies around mid-decade…

The key risks to our fall outlook are predominantly on the downside and mostly related to major policy failures. First, the U.S. Congress may fail to resolve the fiscal cliff issue and the resulting fiscal drag would bring the U.S. economy to a halt in 2013, if not into recession, with adverse spillovers on the rest of the world. Second, the banking and sovereign debt crisis in the eurozone may get far worse, deepening the recession in the periphery countries and bringing material output losses in the rest of the world. Third, the transition to a more balanced economy in China may falter and easier policies may fail to support growth, again with negative spillovers on the rest of the world. Finally, the possibility of oil price hikes remains an additional downside risk to global growth in view of ongoing geopolitical risks and other potential sources of oil-supply disruption.”

Read the full report, Fall 2012 Economic Outlook – Bennett Jones LLP>>