Read the given passage and answer the questions that follow.
When times are hard, doomsayers are aplenty. The problem is that if you listen to them too carefully, you tend to overlook the most obvious signs of change. The year 2011 was bad. Can 2012 be any worse? Doomsday forecasts are the easiest to make these days. So, let’s try a contrarian’s forecast instead. Let’s start with the global economy. We have soon a steady flow of good news from the US. The employment situation seems to be improving rapidly, and consumer sentiment, reflected in retail expenditures on discretionary items like electronics and clothes, has picked up.
If these trends sustain, the US might post better growth numbers for 2012 than the current forecast of 1.5%–1.8%. Japan is likely to pull out of a recession in 2012, as post-earthquake reconstruction efforts gather momentum and the fiscal stimulus announced in 2011 begins to pay off. The consensus estimate for growth in Japan is a respectable 2% for 2012. The ‘hard - landing’ scenario for China remains and will remain a myth. Growth might decelerate further from the 9% that it is expected to clock in 2011 but is unlikely to drop below 8%–8.5% in 2012.
Europe is certainly in a spot of trouble. It is perhaps already in recession, and for 2012, it is likely to post mildly negative growth. The risk of implosion has dwindled over the last few months–peripheral economies like Greece, Italy and Spain have new governments in place and have made progress towards genuine economic reform.
Even with some of these positive factors in place, we have to accept the fact that global growth in 2012 will be tepid. But there is a flipside to this. Softer growth means lower demand for commodities, and this is likely to drive a correction in commodity prices. Lower commodity inflation will enable emerging market and central banks to reverse their monetary stance. China, for instance, has already reversed its stance and has pared its reserve ratio twice. The RBI also seems poised for a reversal in its rate cycle as headline inflation seems well on its way to its target of 7% for March 2012.