Schroders economists cut 2012 growth outlook

Schroders’ economics team has slashed its forecast for global growth next year on anticipation of an “outright recession” in the eurozone.

Keith Wade
Keith Wade

In their latest Economic and Strategy Viewpoint note, Keith Wade, chief economist and strategist at Schroders, and Azad Zangana, the asset manager’s European economist, say the global economy will grow by just 1.8% in 2012.

This is down from the economists’ previous forecast of 3.4% and largely a result of their belief that the eurozone debt crisis will ultimately damage global trade, cause credit from European banks to dry up and push business confidence even lower.

“On the trade side, the rest of Europe is hit hardest through reduced exports, whilst beyond the continent, Asia is worst affected,” Wade and Zangana state.

“Financial links have a similar effect as eurozone banks retrench further, particularly in eastern Europe. For the UK where growth is already weak, the eurozone crisis is expected to tip the economy into a significant recession.”

The economists add that the fall in business confidence in the eurozone and elsewhere will be the biggest influence on the health of the US economy. However, they expect the country to avoid technical recession in 2012.

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