BofA-ML is forecasting growth for 2010 and 2011.
LONDON -- The global economy is likely to relapse into a recession, right? At least that's what respected voices are saying. Last week, a survey conducted by the Association for Financial Professionals in the U.S. found that finance executives were still wary of the possibility of a double-dip recession. And on Tuesday both a senior executive of investment bank Morgan Stanley ( MS - news - people ) and British Chambers of Commerce chief economic advisor, David Kern, talked about the risks of the global economy relapsing into a recession.
But on Tuesday, Bank of America - Merrill Lynch ( BAC - news - people ) challenged that view. The bank told clients that it did not believe in a double-dip and expected 2010 and 2011 to be "good years" for growth in Eastern Europe, the Middle East and Africa.
"Yes, long-term potential growth will be lower after the crisis—but this will not prevent a rebound from unusually low activity," said David Hauner, an economist at the BofA-ML. "In fact, the initial rebound is coming increasingly more consensual, but double-dip fears keep lingering."
BofA-ML's forecast is for 2010 to surprise investors thanks to a rebound in inventories that have fallen to record levels in many markets, the bank said. It also expects that some improvement in fixed capital investment, a relief in consumer confidence and lower unemployment levels will all contribute to a surprising recovery next year.
"This results in GDP forecasts that are substantially above consensus, with growth at 4.2% globally, 3.0% in the U.S., 2.0% in the euro zone and 6.0% in global emerging markets," the bank said. The financial institution also thinks that inflation will remain low, which should allow monetary policy "to remain looser" than the market expects.
For 2011 the bank sees a "slight further acceleration of growth" for all global markets. It forecasts a 4.5% growth worldwide, 3.3% growth in the U.S., 2.5% in the euro zone and 6.2% in emerging markets.
But it seems BofA-ML is not the only institution to be moving away from the double-dip prediction. Also on Tuesday, RBS chief European economist Jacques Cailloux said that although investors remain "very negative" on the likelihood of a steady economic recovery, the bank doesn't subscribe "to the double-dip story" and there should be no relapse "for the U.S., Europe and also for the rest of the world."