Our current forecast calls for the global economy to approach its long-run growth rate of 3.7 percent in 2014.
Central banks’ accommodative monetary policies, coupled with accelerating economic activity in the US and the recovery under way in the eurozone, should benefit emerging markets, especially those that rely heavily on exports to these regions.
And inflationary pressures have remained in check thus far, reflecting weak demand in Europe, slower economic growth in China and the abundance of inexpensive energy in the US.
The EU has started to emerge from recession and economic stagnation, but we expect economic growth in the eurozone to be anemic relative to previous cycles and regions that are further along in the recovery process. The European Central Bank (ECB) should keep interest rates low and occasionally inject the necessary liquidity to nurture growth.
However, the transition from a period of economic contraction to a growth rate of more than 1 percent will bolster the global economy and should benefit China, South Korea and other nations with meaningful exports to the EU. (See Banking on South Korea and a Whirlwind Tour of Asia’s Emerging Markets.)