The global economy has slowed over the past year, with the sovereign debt and banking crisis in several Euro Area countries continuing to be a significant source of market turmoil and downside risks. The Euro Area is currently struggling to recover from a mild recession, while growth in the United States has been weak. Emerging markets, particularly in Asia, continued to be the only robust part of the global economy. Overall, real GDP in the Euro Area as a whole is projected by the Institute of International Finance (IIF) to decline by 0.4% in 2012 and to increase marginally (by 0.5%) in 2013, with major declines in the problem countries and modest gains in the core countries such as Germany. The intensifying bank-deleveraging process in the Euro Area and the associated fragmentation of sovereign debt and bank-funding markets along national lines have contributed to a sharp slowdown in bank credit expansion to the private sector to 0.5% in the year to July 2012. The weakening demand in the Euro Area has contributed in turn to a steep decline in the growth of exports by emerging markets, particularly those in Asia. Growth in mature economies and emerging markets is also projected to slow during 2012, to 1.1% and 4.8%, respectively, with a modest pickup in 2013, to 1.3% and 5.4%, respectively. World growth would thus ease to 2.4% in 2012 and 2.8% in 2013. However, these prospects are subject to sizable downside risks, emanating mainly from potential delays in putting in place the expected policy corrections in the Euro Area and in addressing the looming “fiscal cliff” and debt ceiling risks projected on current policies in early 2013 in the United States. In addition, several key emerging market countries are still in the process of engineering a soft landing.