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Developed world to lead economic growth boost

Dubai, November 17, 2013

An acceleration in global economic growth is expected in 2014, supported by aggressive easy monetary policies in most developed countries, according to Richard Hoey, BNY Mellon's chief economist.  

Global GDP growth should accelerate by half a per cent to three-quarters per cent from the prior pace near three per cent in both 2012 and 2013, he said in 'Outlook 2014'.

“We believe that the implication of ‘Yellenomics’ is that monetary policy will be very supportive of economic expansion for the next several years,”  Hoey said, referring to chairman of the Federal Reserve nominee Janet Yellen, whom Hoey expects will be confirmed by the Senate.  

Global growth acceleration should be led by the developed world, in continued recovery from past economic weakness, for these four reasons - past and ongoing monetary ease; reduced fiscal drag; moderation in the post-crisis deleveraging of the private sector; and moderate energy prices, given the expansion of new sources of energy supply, especially in the US

Turning to the US budget, the future budget battles will end in a low level status quo stalemate rather than repeating the recent pattern of disruptive major clashes over budget policy, said Hoey.

“We believe that the US budget battles have moved from a World War II phase of rapidly moving front lines to a World War I phase of static front lines and trench warfare,” he said.  

“Rather than some ‘grand bargain,’ we expect minor budget compromises with little policy change and substantially less disruption than in the last several years.”

Other Outlook 2014 findings include 2013 Taper Talk/2014 Tapering, where Hoey expects the actual taper by the US to occur in 2014 may prove less disruptive than the mid-2013 sell-off on ‘taper talk’ since the gap between current QE-suppressed Treasury yields and free-market levels has already been reduced.

The findings also include ‘muted European expansion,’ where the euro should remain intact, the double-dip recession ends and a sustained by muted expansion begins; and ‘abenomics fast track,’ according to which Japan is experiencing a fast pace of growth in the early phases of Abenomics, following two decades of stagnation.

After a volatile pattern of pre-buying, then payback, due to the hike in the value added tax scheduled for April 2014, moderate expansion should persist, it said. - TradeArabia News Service




Tags: monetary | Economic Growth | policies |

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