The euro zone will likely remain the main source of risks with the current situation presenting a stark choice between two very distinct trajectories. Europe has a chance to pull through, albeit probably not without a substantial revision in the role and responsibilities of the European Central Bank that would empower it to behave much more like the US Federal Reserve. This remains politically contentious and would probably necessitate a closer fiscal union as a quid pro quo - a controversial move but one necessary for the long-term survival and stability of the euro zone. Importantly, even this muddling through would likely involve years of Japanese-style sub-par growth.

The main risk in Europe comes from the fact that more and more people are openly beginning to contemplate some kind of break-up of the euro zone. Greece and Portugal are the most obvious fault lines but there is a risk of an uncontrolled process pushing contagion to Italy and Spain as well. This would be economically disastrous and send unprecedented shock waves through the European banking system. It would exact enormous real costs of up to 40 percent of GDP of the countries exiting the euro zone without necessarily significantly improving their ability to rectify their structural imbalances.

The US has seen some pick-up in economic activity, albeit at least partly due to temporary tax benefits for investments and a continued payroll tax compromise. At some point consolidation will have to return to the agenda and finding consensus in an election year will be difficult. The US right now has the luxury of some flexibility due to the perceived safe haven status of the US dollar. But this will last for only as long as the troubles of the euro zone are thought to be worse than those of the US. Even a disruptive resolution to the European troubles might change the equation quickly.

Growth in the emerging markets will almost certainly slow down in 2012, because of somewhat tighter policy and structural challenges in the form of higher inflation expectations and asset bubbles. Most of the concern is directed at China where the government seems to have concluded that the post-Lehman stimulus did more harm than good. But even with the efforts to cool down the economy, 8 percent clearly remains the acceptable minimum and getting close to it would result in renewed stimulus. But also emerging markets, such as Turkey, will need a period of slower growth to rectify some of the imbalances that the recent boom has brought.

Overall, 2012 looks likely to be a year of slower but still positive growth. But the range of possible outcomes is unusually wide given the magnitude of risks and the scope for political miscalculations. A global double dip can by no means be ruled out even if it is not the likeliest scenario. The regional tensions, not least ones involving Iran, are another key case in point. The good news for the GCC countries is that they are well positioned to handle even a severe economic storm given their macroeconomic stability and large oil windfalls.

— Jarmo T. Kotilaine is chief economist at the National Commercial Bank.