GlobalEconomicsWeeklyIssueNo:10/43December1,2010GoldmanSachsGlobalEconomics,CommoditiesandStrategyResearchathttps://360.gs.comOur2011and2012Outlook:RoomtoGrowDominicWilsonInthisGlobalEconomicsWeeklywepresentdominic.wilson@gs.comourupdatedeconomicforecastsfor2011,and+12129025924unveilourforecastsfor2012.WeexpectrealglobalGDPtorise4.6%in2011and4.8%inRealGDPGrowthForecastsJanHatzius201020112012jan.hatzius@gs.com2012.Followinga4.9%increasein2010,this%yoy2009GSConsensus*GSConsensus*(GS)+12129020394wouldimplythreeconsecutiveyearsofUSA-2.62.82.72.72.43.6above-trendglobalgrowth.ThisplacesusJapan-5.23.53.01.11.22.0KevinDalywellabovetheconsensusof4.1%for2011Euroland-4.01.71.62.01.41.9kevin.daly@gs.comandprobablyfor2012aswell(thereisnoUK-5.01.81.72.42.02.6+44(0)2077745908consensusyet).WeexpectthemostBrazil-0.27.57.65.04.54.3China9.110.110.110.09.19.5ConstantinBurgisignificantshifttotakeplaceintheUS,withaIndia7.48.58.48.78.58.3constantin.burgi@gs.comsubstantialaccelerationinrealGDPgrowthRussia-7.93.84.05.34.35.6+44(0)2070514009overthenexttwoyearstoa4%pacebyBRICs5.58.78.68.67.98.2Advancedearly/mid-2012.-3.22.92.82.52.23.0StacyCarlsonEconomiesstacy.carlson@gs.comDespiteourrelativeoptimismonglobalGDP,World-0.64.94.74.64.14.8+12128550684*ConsensusEconomicsNovember2010Source:GSGlobalECSResearchwearebroadlyinlinewithconsensusoninflation.Thiscombinationofstronggrowthandmoderateinflationreflectsourviewthatthereremainssignificantsparecapacityatagloballevel.However,thereisconsiderablecross-countryvariationinthisregard,withlargeoutputgapsinmostadvancedeconomies%PotentialMoreSpareCapacityinDMthanEMoffsetbyincreasingcapacityconstraintsinGDP4someEMeconomies.WhilewearebelowOutputGapsconsensusoninflationinthedevelopedworld,2weareaboveformostemergingmarkets.ForecastWeexpectthecombinationofbetter-than-0expectedgrowthandmoderateinflationata-2globalleveltobepositiveforriskyassets,aviewthatrunsthroughourmarketforecasts-4andmanyofour‘TopTrades’for2011.OurWorldPortfolioStrategyteam’send-2011index-6targetsenvisage14%-29%returnsacrosstheDMEMmajorequitymarketsandwearebroadly-8positiveoncredit.Reflectingtherelative070809101112tighteninginEMvs.DM,wearepositiveonSource:GSGlobalECSResearchNJAcurrenciesandnegativeontheDollar.Whileourcentralscenarioisapositiveone,therearesomecleardownsiderisks—withthemostimportantofthesestemmingfrompost-crisisfiscaloverhang.ImportantdisclosuresappearatthebackofthisdocumentGoldmanSachsGlobalEconomics,CommoditiesandStrategyResearchGlobalEconomicsWeeklyOur2011and2012Outlook:RoomtoGrowInthisGlobalEconomicsWeeklywepresentourupdatedexperiencedasignificantslowingandQE2hasbeeneconomicforecastsfor2011,andunveilourforecastsfordelivered.But,despitetheturbulence,globalgrowthistheyearafterthat.Wealsoinitiatethefirstbatchofourheadingfora4.9%outcomefor2010—significantlyhigher‘TopTrades’for2011.Moredetailsonallaspectsofourthanthepre-crisistrendof4%—andconsensusforecastswillbeavailableinaseriesofindividualexpectationshavebeenplayingcatch-upallyear.outlookpiecesbeingpublishedbytheregionalteams.Ourrevisedforecastsfor2011andourfirstforecastsforAsshowninTable1,weexpectrealglobalGDPtorise2012tellastoryofcontinuedglobalrecovery.Most4.6%in2011and4.8%in2012,implyingthreestriking,givenourlong-standingdownbeatviewontheconsecutiveyearsofabove-trendglobalgrowth.ThisUS,wenowshowasubstantialaccelerationinourUSplacesuswellabovetheconsensusof4.1%for2011andgrowthview,withsequentialGDPgrowthrisingprobablyfor2012aswell(thereisnoconsensusyet).graduallytoanabove-trend4%pacebymid-2012.Alongsidethat,wecontinuetoexpectgoodgrowthDespiteourrelativeoptimismonglobalGDP,weareoutcomesinmanyotherpartsoftheworld,givingbroadlyinlinewithconsensusoninflation(Table2).anothersolidyearofglobalgrowthof4.6%for2011.WeThiscombinationofstronggrowthandmoderatethenexpectfurthermodestaccelerationto4.8%intoinflationreflectsourviewthatthereremainssignificant2012,forathirdconsecutiveabove-trendyear.sparecapacityatagloballevel.However,thereisconsiderablecross-countryvariationinthisregard,withUnderneath