“Downside” risks prevail:RBA

The risks to global growth are “still on the down side,” according to the Reserve Bank.

In a quarterly report, just released, the bank says: “As has been the case over recent years, emerging market economies, particularly in Asia, are expected to be the main driver of global growth.”

The bank also says it expects global growth to be around 3.5 per cent in 2012 and to return to trend “around 4 per cent” in 2013.

But it adds a warning.

“Activity in the advanced economies is likely to be subdued given the need for fiscal consolidation and the ongoing effects of deleveraging by the private sector.

“It remains the case that, given the nature of the challenges faced by many advanced economies, the risks to global growth remain on the down side,” the bank said.

The bank is not optimistic about Europe.

It noted moderate expansion in the United States and tentative signs of activity in East Asia.

But it added:- “Conditions in Europe, in contrast, remain very difficult.

“ Some progress has been made in addressing fiscal imbalances and implementing structural reforms, but much work remains to be done.

“Activity in Europe is still contracting, with a negative feedback loop between fiscal consolidation and growth evident in a number of countries.

“This is weighing on business and consumer confidence across the region.”