At his last European Central Bank (ECB) meeting of the year, Mario Draghi said his staff had cut GDP expectations for 2013 to, at best, growth of 0.3 per cent and, at worst, a decline of 0.9 per cent. That’s also likely to be weighted to the back end of the year, with what he described as a “gradual recovery later in 2013.”
This leaves little doubt that we’re in for a recession in the first part of 2013. Further ahead, things aren’t much better. Initial ECB forecasts for 2014 indicate growth of between 0.2 per cent and 2.2 per cent. It’ll take a much steeper growth recovery than that to ease the debt crisis over the next two years.
The situation isn’t much better in Britain. George Osborne delivered his Autumn Statement last week, alongside a widely-expected cut in growth forecasts from the Office for Budget Responsibility (OBR). In fact the OBR cut its expectations for every year of its forecasts. This year it sees a decline of 0.1 per cent, compared to the growth of 0.8 per cent forecast back in March. The recovery will also be shallow – at just 1.2 per cent in 2013 and 2 per cent in 2014. Looking further beyond, the OBR projects growth in the UK of 2.3 per cent in 2015; 2.7 per cent in 2016 and 2.8 per cent in 2017. At least the unemployment peak is likely to be a bit lower than expected – at 8.2 per cent.
A few hints of further complications for 2013 are already making themselves apparent. Yields in Spain and Italy are creeping back up. And we’re about to be thrown back into the electoral cycle in Germany, just to confuse the political side of things further.
What’s more, many have raised the prospect of France becoming the next potential target of the bond markets. The debt dynamics are a little scary, and the country doesn’t have the UK advantage of its own rate-setting central bank.
Some people are happy though. Rob McEwen, chairman of McEwen Mining, last week told me he sees gold rising to $5,000 per troy ounce within four years, driven by accelerating action by central banks. He’s so convinced that he’s holding a 25 per cent stake in his own gold and silver producing business.
If McEwen’s prediction comes true, we’ll all be looking for an invitation to his Christmas party in 2016.
Beccy Meehan is a presenter at CNBC.