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| '''Global stagnation''' is generally considered in early 2012 to be a possible short-term prospect, involving a large part of the world economy. Of 30 countries surveyed by the [[International Monetary Fund]], the growth rates of the economies of 20 were classified as "below trend and moderating"; of 8 as "below trend and rising"; and of 2 as "above trend"<ref>[http://www.imf.org/external/pubs/ft/weo/2011/02/pdf/text.pdf ''Slowing Growth, Rising Risks'', World Economic Outlook, IMF, September 2011, Fig 1.4 p6]</ref>. | | '''Global stagnation''' is generally considered in early 2012 to be a possible short-term prospect, involving a large part of the world economy. Of 30 countries surveyed by the [[International Monetary Fund]], the growth rates of the economies of 20 were classified as "below trend and moderating"; of 8 as "below trend and rising"; and of 2 as "above trend"<ref>[http://www.imf.org/external/pubs/ft/weo/2011/02/pdf/text.pdf ''Slowing Growth, Rising Risks'', World Economic Outlook, IMF, September 2011, Fig 1.4 p6]</ref>. |
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| The global slowdown of economic growth that occurred in 2011, following the strong growth of 2010, is thought to be attributable to a range of factors, including:<br>
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| (a) the completion of the stockbuilding phase of the [[inventory cycle]] that normally follows a [[recession (economics)|recession]];<br>
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| (b) the [[Shock (economics)|economic shock]] caused by the [[tsunami|Japanese tsunami]] of March 2011;<br>
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| (c) the loss of output due to the continuing [[deleveraging]] by banks and the consequent restriction of credit to companies;<br>
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| (d) the effect on demand of continuing deleveraging by companies and households;<br>
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| (e) the effect on demand of the reductions in [[public expenditure]] and the other [[fiscal adjustment]]s in the [[Great Recession#Fiscal aftermath (2010-11 )|fiscal aftermath]] of the [[Great Recession]];<br>
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| (f) the reduction in the availability of [[credit (finance)|credit]] resulting from precautinary action by European banks in anticipation of the [[restructuring of debt|restructuring]] of the Greek government's debt;<br>
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| (g) losses of investor and consumer confidence due to fear of a global financial crisis resulting from a [[sovereign default]] by a major developed country.<br>
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| Assessments of the relative importance of (a) to (g) differ, but it is evident that factors (a) and (b) were transient effects with no implications for current prospects. Factors (c) and (d), on the other hand, may be expected to exert a continuing but diminishing influence. The effects of factors (e), (f), and (g) are expected to persist into 2012 and possibly beyond.
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| In the absence of further downside developments, the major forecasters expect world growth to continue, although at a more subdued rate, through the next two years - but at a rate in the developing countries, at which [[output gap]]s and [[unemployment]] are bound to persist<ref>[http://www.imf.org/external/pubs/ft/weo/2011/02/pdf/text.pdf ''Slowing Growth, Rising Risks'', World Economic Outlook, IMF, September 2011]</ref>. The downside developments that could halt or reverse that growth include:<br>
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| (a) a failure by the [[eurozone]] authorities to take effective action to avert the danger of a [[sovereign default]] or withdrawal from the eurozone by a large member country; <br>
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| (b) failure by the United States authorities to obtain congressional agreement to a viable programme of deficit reduction; and,<br>
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| (c) [[positive feedback]] from, and to, (a) or (b) arising from resulting damage to investor and consumer confidence.<br>
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| The avoidance of outcome (a) requires, at minimmum, the implementation of the [[Eurozone crisis#The decisions of October/November 2011|the decisions of October/November 2011]] in addition to those of [[Eurozone crisis/Timelines#July|21st July 2011]]. The operational details of neither have yet been established and the bond market has reacted with scepticism about their prospects of success. As regards outcome (b), there were already doubts about the ability of the Congress to agree on the necessary fiscal measures<ref>[http://www.imf.org/External/Pubs/FT/GFSR/2011/02/pdf/text.pdf ''Global Financial Stability Report'', IMF, September 2011, page ix]</ref>, and when in November the Congressional Joint Select Committee on Deficit Reduction failed to reach agreement<ref>[http://www.c-span.org/uploadedFiles/Content/Special/Deficit_Committee/Reaction_to_SuperCommittee.pdf ''Statement from Co-Chairs of the Joint Select Committee on Deficit Reduction'', 21 November 2011]</ref>, the bond market failed to react. The global investor and consumer pessimism in the autumn and winter of 2011<ref>[http://www.weforum.org/content/pages/global-confidence-index ''Global Confidence Index'', World Economic Forum, September 2011]</ref> was widely attributed to what was perceived as policy failures on both sides on both sides of the Atlantic, however.
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| <ref>[http://www.oecd.org/document/47/0,3746,en_21571361_44315115_49095919_1_1_1_1,00.html ''OECD calls for urgent action to boost ailing global economy'', OECD 28 November 2011]</ref>
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