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Economic development

Global economy

The forecast for the global economy in 2013 is subject to numerous uncertainties. As the world economy put 2012 behind it and moved into 2013, it was heavily overshadowed by the Eurozone crisis and the unpredictable direction of fiscal policy in the United States. At the beginning of 2013, it was only after an agonising struggle that an initial last-minute compromise was reached in the US budget dispute surrounding the so-called fiscal cliff. What is more, the pace of growth in emerging markets remains muted.

All in all, developments in 2013 will depend first and foremost on how the crisis in the Eurozone unfolds. Just how well it is managed will in turn depend on the success of consolidation measures taken by the individual member states. In its basic scenario for the current year, the Ifo Institute assumes that member states will continue unchanged and on schedule along the path towards consolidation and that there will be no re-escalation of the financial situation in the Eurozone.

Mature national economies will be dominated in 2013 by the consolidation efforts undertaken in the private and public sector and their fundamentally restraining effect on economic activity. This tendency will be assisted above all by a monetary policy set on keeping interest rates extremely low. If governments act systematically on their moves towards reform, the trust of investors, the business community and households in the stabilisation of the Eurozone will likely begin to grow again. In the United States output is expected to trend higher, accompanied by stronger domestic demand. In many emerging markets, too, the measures taken in the areas of monetary and fiscal policy will likely make themselves felt and have a favourable effect on the economy. Disposable incomes will probably rise, thereby stimulating private consumption. The Kiel Institute for the World Economy estimates growth of 3.4% in global real GDP.


At the beginning of the year a looming recession in the United States was narrowly averted after Democrats and Republicans found a last-minute solution to the budget wrangling over the fiscal cliff. The debt level and deficit reduction will nevertheless continue to be the issues which shape economic policy. However, the debate about raising the debt ceiling and the question of automatic spending cuts will require further negotiations between the parties. An economic upturn early in 2013 is unlikely because uncertainties in US fiscal policy are still hampering the willingness of companies to commit to capital expenditures. Nevertheless, as the year goes on the upswing in investment in residential construction and favourable effects on the labour market could stimulate private consumption and give fresh impetus to the tame pace of economic growth. The export sector is expected to deliver only minimal stimuli, since weak demand from key US trading partners – such as in the Eurozone – is hindering any rise in exports. Demand for imports in the US will probably also remain low as a consequence of the ongoing consolidation efforts. Overall, exports may pick up slightly. According to the calculations of the Ifo Institute, GDP will likely grow by 1.6% in 2013.


Within the Eurozone the situation will doubtless vary from country to country. Private consumption and public spending will remain muted on account of the restrictive fiscal policy. Domestic demand is therefore likely to decline, as a consequence of which corporate investment will probably also contract further – at least in the first half of the year. Positive stimuli are expected to come from the export sector, for which orders from foreign markets outside Europe are particularly important. In view of the weak state of the economy, further increases in jobless rates are to be expected; allowing for considerable regional differences, the Ifo Institute estimates the average unemployment rate in 2013 could be as high as 12.2%. Private consumption will probably also continue to fall, at least for the time being, although it may stabilise towards the end of 2013. All in all, the Ifo Institute forecasts a contraction of -0.2% in GDP for 2013.


Germany enters the 2013 financial year with a diminished pace of growth. Working on the assumptions of its basic scenario, i. e. that there will be no further intensification of the crisis in the Eurozone and that consolidation measures will be systematically implemented, the Ifo Institute anticipates a delayed upturn in Germany over the course of the year. This may be driven by stimuli from the domestic economy as well as by growing non-European demand for German export goods. As a result, private consumption and equipment spending could also pick up again; exports may begin to rise again as well. No appreciable improvement is expected on the labour market for the time being; unemployment will probably rise slightly to 6.9%. According to the Ifo Institute, GDP should grow by around 0.7% overall.

China, India, Japan

Additional stimulus packages will likely be approved in China so as to enable the country to achieve its growth targets. The Ifo Institute anticipates an increase of 9.0% in GDP. Driven by rising exports to China and the United States, the Indian economy could also see further modest expansion. GDP in India will likely grow by 4.6% overall. In Japan, on the other hand, the economy is hampered by weak demand for exports; an increase of just 0.8% in GDP is expected.


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