| dc.description.abstract | • In 2013, the expansion of the world economy will be a bit stronger than in 2012. Growth in Asia should be more dynamic than in 2012, and the US economy appears to robustly withstand the restrictive and unstable US fiscal policy, thanks to a very expansionary monetary policy. • In spring 2013, the euro crisis is clearly less acute than in 2012. One indicator for this is that in February the liabilities of the Spanish and Italian central banks to the rest of the Eurosystem were by almost a quarter lower than at their maximum in August. Moreover, the inconclusive elections in Italy and the present crisis in Cyprus have only modestly raised risk premia for Italian government bonds, and premia for Spanish bonds stayed about constant. However, for the crisis of confidence in the euro not to return, it is crucial that signs of a stabilizing real economy in the southern member states become visible in the course of this year. • The consensus is for a swift return of the German economy to growth. Elsewhere, firms and households are, for good reasons, still uncertain and hence limit their investment and consumption. In the southern European countries, and probably also in France, the recession will not end at least before the second half of 2013. One relevant factor is that although financial conditions for banks have markedly improved, this improvement has not yet reached nonfinancial firms and private households in these countries. • Overall, we forecast euro area GDP to be -0.3 percent lower in 2013 than in 2012, a downward revision from the positive growth of 0.2% we expected in our last report. The situation should improve in 2014, with an expected GDP growth of about 1.3%. However, this will not be sufficient to lower the unemployment rate, which actually could further increase to about 12.6%. • In the current context of economic sluggishness, our inflation forecasts have slightly decreased, mostly in line with the updated ECB expectations. Our inflation expectations for 2013 have moderated to a y-o-y rate of 1.6%, and they remain subdued also in 2014, at about 1.4%. The likelihood for the ECB to cut interest rates has moderately increased. | en |
