End of Desynchronized Global Growth

I. GLOBAL ASSESSMENT AND OUTLOOKFresh high frequency statistics at the start of 2012 confi rm a conti nuationofdesynchronized worldwide economic growth, which began last year. The Euro Area's recession is deepening, North America continues to recover at a slow pace, Latin America's growth moderates, the Middle East is in economic transformation, and Asia's growth begins to fade due to weakening of foreign demand.Globalization in trade and the integration of financial markets will end with unsustainable, uneven growth patterns among regions and economic clubs in 2013. During the convergence period towards fundamentals-based economic growth, there will be a recovery in Europe and permanently lower growth rates in the fast-growing emerging economies of the last decade. The current phase of the global business cycle is dominated by transitional adjustments caused by several asset bubbles and unwise transitory economic policies.Global output is projected to expand by 2.8% in 201 2 from 3.8% in 2011, a downward revision of about 0.6 percentage points relative to our December 2011 global forecast. In 2013, global prospects will slightly improve with global GDP expanding by 3.6%, compared with a growth rate of 5% in 2010.The global outlook may deteriorate further from an emerging spike in oil prices reflecting a risk premium, from the Middle East tensions related to Iran, Syria, and Israel, with the involvement of Russia and China in the United Nations regarding sanctions. The surge in oil prices has intensified the stagflation scenario, which has been slowly developing in the last two years.Without an escalation of the geopolitical crisis in the Middle East, we forecast global inflation to average 4.1 % this year amid weakening demand, compared to 4.7% in 2011 and 3.6% in 201 0. Worldwide average inflation is forecast to slightly accelerate to 4.3% in 201 3.II. SHORT-TERM INDICATORS AND FORECASTSThe baseline forecast incorporates major findings of the World Economic Survey conducted by the German Ifo Institute and the Paris-based International Chamber of Commerce, which was conducted in the first quarter of 2012. About 1,100 executives from 120 countries have indicated that the world's economic climate slightly improved in the first quarter of 201 2, after two consecutive declines. However, the latest global climate reading remains significantly below its long-term average. The majorfindings of the first quarter's survey areas follows:* Worldwide, executives evaluated the current economic situation, the first quarter of 2012, unfavorably with overall business conditions slightly below satisfactory levels. They found economic activity in their countries to be worse than in the first quarter of 2011. Most important, regarding the future, executives expect economic conditions in the next two quarters of 2012 to be at the same levels that currently prevail in the first quarter of 201 2.* On a regional basis, North American executives assessed the current economic situation to be below satisfactory levels, though considerably better than a year ago. Looking forward, business experts from the United States and Canada expect economic conditions to get better in the next six months. In Asia, executives appraised the current economic situation to have deteriorated to performance levels substantially below those a year ago; they were not confident about the future, expecting economic activity in the next six months to be lower than in the first quarter of 2012. In Western Europe, executives' appraisals of current conditions were below satisfactory levels and well below economic levels that they experienced in the first quarter of 2011; expectations of European business executives on future economic conditions signaled a further deterioration for economic activity in the next two quarters.* With respect to prices, survey participants expect average worldwide inflation over the next two quarters to stay nearly at current levels. …