Economic activity
At last, after several years marked by crisis, the events of
2012 suggest that some of the key broadly based under-
standings are beginning to translate into action. Progress
has been and remains slow. Frictions abound and the
various economies are at varying stages of the cycle.
However there is consensus among all actors, public
and private, regarding the need to take united action on
certain fronts, making sacrifices short term for the sake of
tangible results later on.
The first point on which a consensus holds relates to
the need to stabilise the financial system and reinforce
the banks’ solvency to ensure the orderly reactivation of
financing flows. For this to happen, sovereign nations
must simultaneously become more credible in the eyes
of their creditors, to which end they must start to delev-
erage: this means closing the deficit gap in a relatively
short period of time. Significant steps were taken on both
fronts in 2012, driven by governments and supranational
institutions, particularly in Europe. However, the sover-
eign debt crisis has yet to fully remit; it has been waning,
however—a process that gained impetus towards the end
of last year (and has continued so far in 2013).
The second area of consensus relates to the deleveraging
underway among companies and households as a prereq-
uisite to seeking out prosperity and growth once again.
In the corporate arena (banks and non-banks), this has
resulted in asset sales and extraordinary provisioning
efforts that have eroded income, although core busi-
nesses were showing a profit until the close of the third
quarter of 2012.
Both factors caused accelerating contraction in consumer
spending and investment in 2012, ultimately eroding
growth forecasts for 2013 and 2014 in nearly all theworld’s
economies. However, certain underlying long-term
economic variables have improved, which is probably
why equities rallied in most developed economies in 2012
against the backdrop of reduced volatility. The economies
most affected by multiple crises at once, Spain being
a case in point, saw the correction in their benchmark
equity indices ease in the second half of the year, albeit
remaining in negative territory for the full year, penalised
by excessive volatility, which began to drop sharply only
in December.
IMF growth projections (October 2012)
Actual
Projections
2010
2011
2012
2013
GDP growth (%)
World output
5.1
3.8
3.3
3.6
Advanced economies
3.0
1.6
1.3
1.5
US
2.4
1.8
2.2
2.1
Japan
4.5
-0.8
2.2
1.2
UK
1.8
0.8
-0.4
1.1
Eurozone
2.0
1.4
-0.4
0.2
Germany
4.0
3.1
0.9
0.9
Spain
-0.3
0.4
-1.5
-1.3
Newly industrialised Asian economies
8.5
4.0
2.1
3.6
Emerging market and developing economies
7.4
6.2
5.3
5.6
Latin America and Caribbean
6.2
4.5
3.2
3.9
China
10.4
9.2
7.8
8.2
India
10.1
6.8
4.9
6.0
World trade volume (YoY%)
12.6
5.8
3.2
4.5
Imports
Advanced economies
11.4
4.4
1.7
3.3
Emerging market and developing economies
14.9
8.8
7.0
6.6
Exports
Advanced economies
12.0
5.3
2.2
3.6
Emerging market and developing economies
13.7
6.5
4.0
5.7
Consumer prices (YoY %)
2010
2011
2012
2013
Advanced economies
1.5
2.7
1.9
1.6
US
1.6
3.1
2,0
1.8
Japan
-0.7
-0.3
0.0
-0.2
UK
3.3
4.5
2.7
1.9
Eurozone
1.6
2.7
2.3
1.6
Germany
1.2
2.5
2.2
1.9
Spain
2.0
3.1
2.4
2,4
Newly industrialised Asian economies
2.4
3.4
2.3
2.2
Emerging market and developing economies
6.1
7.2
6.1
5.8
15
3
Annual
Report 2012
/ BME
Market Environment
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