Global and local economic prospects

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At a country-by-country level, it is clear that while expectations about global economic recovery do not always match local experience, the latter often reflect expectations about the future. Twenty five percent of US respondents think that the global economy will deteriorate over the next few years. Respondents in Asia (excluding Japan) are, in contrast, much more likely to have a positive outlook: Only 5-6% of respondents in Hong Kong, Singapore and India think that the global economy will deteriorate. And as Chart 5 indicates, they are also more likely to forecast growth.

The meaning of wealth 5 of 17 Impact of the downturn on the wealthy 3 of 17

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Rather more surprisingly, some of those who have been badly burnt by economic slowdown, such as respondents in Spain and Ireland, are among the more optimistic regarding global prospects. For example, 26% of respondents in Ireland think that the global economy will grow over the next few years, as did 40% of respondents in Spain - well above the 18% average for this response.

Respondents do not think that the recovery in the global economy will be straightforward. Only 18% of the respondents think that the global economy will grow in a sustained way over the next few years, with 36% forecasting that it will be stable but with limited growth. A further 24% think that it will deteriorate and then improve; 5% that it will grow and then deteriorate. Women and the very wealthy are particularly pessimistic.

But respondents in some regions are much more optimistic than others. As Chart 4 suggests, the picture here is complex, but respondents in Latin America are particularly optimistic about global economic prospects, whereas those in Europe and the US are more likely to think that conditions may deteriorate. Asia Pacific respondents lie somewhere in the middle of the spectrum - although, again, once respondents from Japan are removed from the calculation, then the respondents' mood seems rather brighter.

 

It is also clear that the very wealthy (those with investible assets of £10 million plus) are more downbeat about global economic prospects, despite having been less affected by the downturn. Twenty five percent of these respondents think that the global economy will deteriorate over the next five years (vs. a 17% average); whilst 15% think that it will grow (vs. an 18% average).

Interestingly, their source of wealth does not seem to make much of a difference to respondents' views on global economic prospects: Entrepreneurs are not markedly more optimistic than those who have accumulated wealth through investment gains, for example.

Individuals' forecasts for their local economy broadly match their outlook for the global economy. The same proportion (18%) believes that their local economy will grow over the next five years, with the most optimistic regions being Latin America, Australia and parts of Asia (excluding Japan). Again, the very wealthy would appear gloomier than the other groups about the prospects for the economy in which they live - as are those over the age of 55.

Also of note is that a full 25% of US respondents think that their own domestic economy will deteriorate over the next few years, and only 12% think that it will grow consistently.

It also appears that high net worth individuals are more gloomy than professional economists.

Michael Dicks, Chief Economist at Barclays, draws a comparison between the survey respondents' views on the global economy and those of professional economists. As he points out, "high net worth individuals are rather more gloomy than most professional economists." Nearly one in four of our survey respondents expect the global economy to deteriorate this year and a little over one in three expect it to be broadly stable - leaving just one in four of them penciling in growth.

When it comes to professional forecasters, by comparison, about three out of four are looking for decent or strong growth during 2010, with only one in four expecting a failed take-off.

Using the past variation in growth rates to calibrate what respondents likely mean when they say they expect "growth" or "deterioration" in activity, it is possible to translate these qualitative survey responses into numeric values. Such an exercise suggests that the single most likely outcome, in terms of growth, expected by survey respondents is not that different from those of professional economists - a global growth rate above 3% this year.

However, respondents in the developed economies are notably downbeat. This suggests a significant tendency to extrapolate from your own "home country" experience to the world at large. In developed economies, often still struggling to return to sustained growth, there seems to be a presumption that the world will soon fall apart.

This difference in attitude between survey respondents and professional economists is particularly evident if we look at forecasts for the US economy. The US-based wealthy are very gloomy, with more than half expecting weak growth or outright falls in GDP in the US this year, whereas most professional economists judge that there will be strong growth -- a view shared by the Federal Reserve and international organisations such as the IMF and OECD.

Mr Dicks can understand survey respondents' caution. "Barclays is rather more gloomy than most other professional economists: high net worth individuals are even more so. It is most likely they fear that the high, and rising, burden of public debts may make it increasingly difficult for policymakers to keep the recovery on the road."