Slow Recovery of Global Growth. Medium Term Forecast of the World Economy Until 2014

The forecast of global economic trends until 2014 is based on the following assumptions: in the advanced economies, monetary policy will remain expansionary also in the medium term, albeit not as strongly as in the most recent past. Key interest rates will remain at an average of 2.4 percent in the USA and about 1.5 percent in the euro area. From 2011 onwards, fiscal policy will be tightened – to a larger extent in the euro area than in the USA. Thus, for the average of the euro area countries the increase in public debt is expected to be reduced below the Maastricht limit of 3 percent of GDP, whereas in the USA it is likely to amount to 7 percent of GDP. Due to the devaluation of financial and real assets the savings ratio of US households will rise to 5.2 percent until 2014. As a result of the enormous US foreign debt, the dollar is expected to depreciate further: the forecast assumes that the euro exchange rate will rise to $ 1.63 by 2014. The weak dollar will favour a rise of the crude oil price. It is expected to reach $ 100 by the end of the forecast period.