GlobalForecasts for global economic growth for 2014 haven’t changed since the start of the year, even though the start was uneven and slower than expected in some areas due to bad weather. We still see global growth rising 3.1% in 2014, up from 2.4% in 2013.
USAlthough the US unemployment rate has remained essentially unchanged for the past few months, further inspection of first-quarter labor market data reveals impressive gains that bode well for faster economic growth in the second quarter of 2014 and beyond.
EuropeWith a successful bond auction this week, Greece’s ambitions to exit its bailout late this year have taken an important step forward. We believe such a bailout exit is now more likely. However, with debt still at very elevated levels, many of the country’s fundamental problems remain unresolved.
AsiaHeadline inflation rates in Malaysia and the Philippines have rebounded in recent months. While the rises are seen to be technical and transitory, concerns about a second-round effect and the global economic cycle are presenting a challenge to central bankers in both countries.
AustralasiaEven if many of the factors behind our medium-term outlook for Australia are still intact, the balance of risks has clearly shifted, making rate cuts less likely. But expectations of an imminent rate hike are well off the mark, in our view.
JapanThe consumption tax hike on April 1 injects a large amount of uncertainty into Japan’s economic picture. It will be difficult for a while to discern the true underlying trend. Does greater uncertainty mean the Bank of Japan should be acting again?
EEMEAWith the US threatening sanctions against strategic sectors of the Russian economy, the likelihood of further escalation in the economic and financial war between Russia and the West has increased significantly. While Russia is in a better position to withstand an external financing stress now than in 2008, the loss of Western funding will be damaging for Russia’s economy.
Latin AmericaThe unusually dry season has depressed water levels in Brazil’s reservoirs, and a scenario of electricity shortages later this year can’t be ruled out. If energy rationing comes, it will hurt economic activity and the fiscal bottom line—possibly leading to a credit-rating downgrade.
CanadaIn 2013, Canada’s economy expanded by 2.0%—better than expected and up from 1.7% in 2012. But today, growth still relies too heavily on household consumption, and we see continued headwinds that may thwart a “great rotation” toward more balanced, diversified economic growth.