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Citigroup: The Global Economy Will Grow By &Nbsp, But The Eurozone Will Sink Into Recession.

2011/11/30 9:18:00 19

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The Citi economist released on Tuesday for next year and beyond.

Economics

And Finance

market

In the outlook report, it is predicted that the global economic growth will slow down, the euro area economy will fall into recession, and the sovereign credit rating of more countries will be lowered in the next two to three quarters.

Citigroup economist also

Estimate

The major industrialized economies will maintain ultra-low nominal interest rates and negative real interest rates for a long time.

They expect the euro to survive the crisis.

Willem Buiter, Citigroup's chief economist, said the eurozone crisis is expected to intensify and will be curbed and alleviated after the policy response.

However, he also said that this expectation still depends on many risk factors, most of which are downside risks. On the positive side, the ECB and creditor countries may be willing to publicly commit themselves to provide large-scale assistance, and avoid the further extension of the debt crisis in time, but the possibility of such a situation is very small.

Citigroup still expects growth of the global economy to be driven by emerging economies, but will reduce its economic growth rate from 3% in 2012 to 2.5%.

With regard to the fate of the euro, Citigroup is expected to further deteriorate the euro zone sovereign debt and banking crisis next year. The difference between the yield of the problem treasury bonds and the benchmark national bond yields will further expand, the tension of the banking industry will continue and the euro zone may fall into recession.

But Citigroup said the euro zone is unlikely to collapse, but it will need further support from the European Central Bank to avoid a disorderly default in the euro zone's systemically important member states such as Italy and Spain.

Economists predict that in the next two to three quarters, a series of sovereign credit ratings will be downgraded in the euro area, including Austria, Belgium, France, Greece, Italy, Portugal and Spain.

Globally, the credit rating of Japan and the United States is likely to be lowered in the next two to three years.

Citigroup also expects the ECB to reduce its policy interest rate to 0.5% in 2012, pushing the overnight interest rate to near zero.

Britain may expand the scale of quantitative easing substantially.

The US policy rate will remain at an ultra-low level until 2014, and the UK and the euro area will probably maintain ultra-low interest rates until 2015 and 2016 respectively.

China may make policy fine-tuning before the lunar new year, which may reduce the deposit reserve ratio.