Global GDP to improve – Moody’s


The global economic environment remains mixed at present but the broad picture still points to acceleration in 2015, particularly in the Asian region, Moody’s Analytics said in a new report.

“The global economy is at a turning point and is expected to shift into higher gear in the final months of 2014 despite the headwinds from the tepid turnaround in Europe,” Moody’s Analytics, a division of Moody’s Corp. engaged in economic research and analysis, said in its latest Global Outlook report.

The firm said global gross domestic product (GDP) is expected to expand at a subpar 2.6 percent in 2014 but will accelerate above 3 percent in 2015 and 2016, propelled by a stronger United States economy and renewed momentum in emerging markets.

In Asia, strengthening global demand will lift export-facing economies in the region, particularly in high-tech industries such as semiconductors and capital machinery, the Moody’s report said.

Fiscal and monetary stimulus measures implemented in 2014 will help these economies sustain domestic momentum next year, it said.

“The Asia region is expected to expand by 4.5 percent in 2014, similar to gains in 2012 and 2013, but firming global demand and stronger domestic spending will lift growth in most countries toward potential by the middle of 2015,” it added.

Downside risks
Despite the expected improvement in global conditions in the final months of the year, Moody’s Analytics warned that the potential for policy missteps continues to pose substantial downside risks.

It said a bumpy exit from quantitative easing and transition to tighter US monetary policy poses downside risks to both advanced and developing nations.

Tighter US monetary policy could also prompt large capital outflows from emerging markets, weighing on confidence, financial stability, and growth, it added.

“If global risk aversion were to spike, foreign investors could sell emerging market bonds, weakening currencies and pushing up imported inflation.”

Moody’s Analytics noted that a resurgence of risk aversion in capital markets, particularly in the fiscally stressed eurozone nations, could still take the sovereign crisis to new lows.

“The euro zone faces the added risk of an extended period of disinflation or outright deflation. If it persists, deflation would add to the debt burden of financially stressed countries and reignite the region’s banking and sovereign-debt crises,” it said.

The firm added that geopolitical risks also remain elevated in most regions.

“Further deterioration in the Russian-Ukraine conflict and the standoff between Russia and the West continue to dominate near-term risks. The conflict in the Middle East or an escalation of tensions in Africa could also disrupt global oil supplies and raise prices,” it said.


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