Goldman Sach: growth in 2011

The world economy can expect another strong year of growth in 2011, according to our annual economic forecast. The United States can expect substantial acceleration in real GDP growth over the next two years to a 4% pace by early/mid-2012 – according to the Goldman Sach Group.

Jan Hatzius, Chief US Economist, Goldman Sachs, and Sandra Lawson, Senior Global Economist in the Global Markets Institute at Goldman Sachs, discussed the outlook for the year ahead in early December 2010.

Highlights

* Our revised forecasts for 2011 and our first forecasts for 2012 tell a story of continued global recovery. Most striking, given our long-standing downbeat view on the US, we now show a substantial acceleration in our US growth view.
* Underneath this robust story is a gradual shift in the mix of growth. We expect a pick-up in GDP growth in the advanced economies through the year and even more clearly into 2012, led by the US. And, while we expect emerging markets (EM) and BRICs growth to remain solid, we see a mild deceleration in growth through 2011 and stable but high growth in 2012.
* The result is a modest narrowing of the performance gap between the developed and EM economies, in absolute terms and relative to their trends.
* With lots of spare capacity in the US and other large developed economies, we expect monetary policy to remain very accommodative, with no interest rate increases in the US in 2011/12 and a slow pace of tightening elsewhere.
* But the emerging world has a lot less economic slack and diminishing US recession risk may serve to reinforce the tightening of policy that is already underway in some quarters.