According to Willem Buiter, Citi’s Chief Economist, 2011 looks like it is going to be another year of global growth, even though that growth will probably be sporadic to say the least.
Buiter argues in the Global Economic Outlook that while global growth should stay above average, less than half of it will be growing strongly. CitiBank and its Investment Research and Analysis group released the report titled “Prospects for Economies and Financial Markets In 2011 and Beyond” earlier today, and the detailed report includes extensive global market forecasts and expert economic forecasts, by country and region.
The banks economists concluded that “The World’s major economies will continue to change dramatically, it seems that in 2020, at least 4 of the world’s biggest ten economies will be emerging markets (China, India, Russia and Brazil) and 3 of the biggest 5 will be Asian (China, Japan, India). These trends inevitably are starting to reshape global institutions, with the shift from G7 to G20 and probably to a new narrower pool of major economies.”
Another highlight of the report states that the future looks somewhat brighter for companies than it does for consumers as financial surpluses in the corporate sector seem unusually high in Europe, the United Kingdom and the United States. It is thought that any growth in consumer spending will be a result of the overall emerging markets and not necessarily from industrial countries.
Certain industrial economies such as Europe, the UK, the US and Japan are also set to face large headwinds from upcoming fiscal consolidation, poor availability for credit and private deleveraging, with some Euro countries continuing to face solvency and liquidity crisis for their banks.
Policy rates are expected to hold in 2011 with just a handful of industrial countries thought to be likely to raise rates, such as: Sweden, Australia, and Switzerland and because of its continual higher-than-target inflation, the UK.
China is also expected to raise it rates in 2011 by a further 100bp. It is likely that we will see a slow ease-up of credit supply as bank losses are deemed to be past their worst. It is however estimated that banks in the United States will have to raise their T1 capital by around 3 percentage points in order to meet Basle 3 requirements.
There are still some uncertainties about the banking industry structure, which leaves those in the financial world treading with an air of caution.