Deloitte Examines the Current and Future Economic Environments of the United States, China, the Eurozone, the United Kingdom, Japan, Brazil, Russia, India, and Turkey.

Deloitte Research’s Third Quarter 2011 Global Economic Outlook

Deloitte In the third quarter issue of the Global Economic Outlook, Deloitte member firm economists examine the current and future economic environments of the United States, China, the Eurozone, the United Kingdom, Japan, Brazil, Russia, India, and Turkey.

“In recent months the major areas of uncertainty for the global economy have revolved around the crisis in the Eurozone, the future path of monetary and fiscal policy in the United States, and the fight against inflation in emerging markets,” says Ira Kalish, Director of Global Economics, Deloitte Research, part of Deloitte Services LP in the United States. “Our view is that failure to resolve these issues will have a negative impact on global growth and stability.”

In its analysis of the future of the euro, the report suggests that “the rescue of Greece will help calm nerves and ease the pressure which has been building in the European bond market.” On the topic of monetary policy in the United States, while the report does not rule out another round of stimulus, namely QE3, it suggests that reducing interest paid on bank reserves could be an alternative to quantitative easing, as it would likely prompt banks to lend more and boost credit growth.

The report states that despite the problems in the housing market and sovereign debt in Europe, the case for growth in the United States seems to be more compelling at the moment. As for Europe, recovery will depend on implementing a permanent solution to the debt crisis. Lowering inflation and steadily increasing average earnings will be key for recovery in the United Kingdom.

The BRIC countries are experiencing rapid economic growth, but rising inflation could derail the momentum even there, says the report. Meanwhile, policymakers in China and India have indicated a willingness to sacrifice growth in order to rein in inflation.

The higher valued Brazilian real is harming the competitiveness of exports, but it has also made the country an attractive destination for global capital. Monetary tightening and fiscal rectitude will be critical for Brazil’s long-term economic growth prospects, according to the report.

In Russia, the relatively high inflation and the impact of oil prices are main concerns. The central bank’s tightening of monetary policy seems to have abated the acceleration of consumer prices. However, the report suggests that the direction of oil prices will be critical in whether or not the government is able to boost revenues and temper inflation.

In Japan, a harsher than expected economic decline stirs up many questions about the financing of reconstruction efforts and electricity generation. The report explores the impact of various ways of financing the reconstruction.

Finally, this quarter’s Global Economic Outlook, for the first time, offers insights on Turkey’s economy. The report suggests that while Turkey’s growth has been spectacular, several challenges remain, including a burgeoning external deficit and uncomfortably high inflation. Yet overall there is more reason to be positive than negative regarding the Turkish economy, the report concludes.

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