1. Global economic forecast November 1st 2009

2. The economy has started to recover, but growth is heavily driven by short-term factors, such as a stabilisation of inventories and massive fiscal stimulus Households remain heavily indebted. They have raised the share of income they are saving, but will have to do more to improve their balance sheets House prices have stabilised, but a large stock of houses on the market now or coming in the near future will exert renewed downward pressures on prices

3. Europe’s economy has started to grow, but prospects are far from bright The economy is burdened with spare capacity and urgent need for fiscal consolidation Unemployment has risen only moderately due to wage subsidies, but an employment recovery will be slow Despite fragile public finances in some countries, a sovereign default in the euro are is unlikely

4. Japan’s recovery will be supported mainly by a significant fiscal boost Wage cuts for workers and rising unemployment will weigh on consumer sentiment Urgent fiscal consolidation greatly limits room for further fiscal stimulus beyond measures already approved Weak domestic demand and a strong yen are putting downward pressure on Japanese prices again

5. Chinese growth will be supported by fiscal and monetary stimulus, but this risks aggravating existing imbalances India has been hit by a bad monsoon and rising inflation, but the economy will still perform well in 2010 and 2011 Brazil has been hit less than expected by the crisis, and is supported by Asian demand for its commodities Russian growth prospects have been hit by the bursting of a credit bubble

6. Oil consumption growth will recover in the developing world in 2010 but OECD consumption growth will be subdued Output restraint and significant spare capacity in OPEC producers suggests ample supply US dollar weakness and loose global monetary conditions will support prices

7. Rising emerging market incomes and urbanisation will underpin medium- term demand growth Years of underinvestment, particularly in agriculture, will push up prices In the near-term, many raw materials suffer from temporary supply shortfalls Gold prices have been fuelled by vibrant investor demand, while fundamentals remain weak

8. Most major developed countries are in the process of phasing out unorthodox monetary measures Euro zone, UK and Japanese policy rates to be held at emergency levels until end-2010 US will start hiking rates in Q3 2010 Lingering banking sector and household weakness suggests that the pace of any tightening will be slow

9. The US$ is currently depressed by its use as a funding currency for carry trades Gradual monetary tightening in the US will undermine the carry trade and lead to a moderate US$ appreciation Despite widespread concerns, the dollar will remain the major global reserve currency for a long time The yen will remain firm against the US$, partly reflecting Japanese institutional investors home bias

10. The global economy experiences a deep double-dip recession Regulatory tightening after the financial crisis is too stringent Economic upheaval leads to widespread social and political unrest Key markets fall into a deflationary spiral The world suffers a major pandemic 16 20 16 15

11. New asset bubbles burst, creating renewed financial turbulence Protectionism takes hold, undermining globalisation The US dollar collapses Sovereigns default as public debt spirals out of control A geopolitical shock hits the global economy 12 15 10 9 6