Bloomberg News

UBS Cuts 2012 Global Economic Growth Estimate on Europe

November 30, 2011

(Updates with economist’s comment in fourth paragraph)

Nov. 29 (Bloomberg) -- UBS AG lowered its estimate for global growth next year, citing Europe’s deepening debt crisis and a “sharp deterioration” in growth indicators.

The expansion may be 2.7 percent, compared with a previous estimate of 3.1 percent, London-based UBS economists Larry Hatheway and Stephane Deo said in an e-mailed note today. They expect the euro area to enter a recession in the current quarter and contract next year.

Morgan Stanley said yesterday that it lowered its forecast for global expansion next year to 3.5 percent from 3.8 percent, citing “anemic” growth in the U.S. and a recession in Europe. Moody’s Investors Service said today it’s considering lower debt ratings for banks in 15 European nations as the sovereign-debt crisis threatens the region.

“Political uncertainty and the absence of a more pro- active approach from policy makers to address the crisis are depressing confidence and risk-taking,” Hatheway said in the note. “As a result, euro zone domestic demand is likely to falter, with ramifications for global growth via weaker world trade.”

A deeper contraction of European bank credit “can no longer be ruled out” given the deterioration of funding conditions for European banks, he said. The bank now estimates the euro area will contract 0.7 percent next year compared with a previous forecast for 0.2 percent growth. A recovery in 2013 will lead to expansion of 0.8 percent, Deo said.

Curtailing Crisis

Asian stocks rose, with a benchmark index headed for a second day of gains, amid speculation European leaders are closer to agreeing measures that may help curtail the region’s debt crisis. The MSCI Asia Pacific Index gained 0.4 percent to as of noon in Tokyo.

UBS lowered its 2012 growth estimate for the U.S. to 2 percent from 2.3 percent and for China to 8 percent from 8.3 percent, according to the report.

Growing doubts about the survival of Europe’s monetary union has caused global growth to stall and represents the main risk to the world economy, the Organization for Economic Cooperation and Development said yesterday.

--Nerys Avery, Richard Frost. Editors: Nerys Avery, Paul Panckhurst

To contact Bloomberg news staff for this story: Nerys Avery in Beijing at navery2@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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