Global Economic Outlook

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Global Outlook reports is updated on a frequent basis to reflect current themes of interest, such as global growth and inflation forecasts, global market conditions, and global flows of funds.

Our publications are particularly for fund managers, asset allocators and financial companies as well as any other multinational companies with global operations


Monthly Macroscan: Key Implications

September 30th, 2014

The latest data of the flash manufacturing PMIs far suggests that the pace of global growth accelerated in the third quarter, despite more signs of weakness in the euro-zone and Japan.


  • The global economy is forecast to grow at 3.5% over the second half of 2014. The Euro Zone crisis that has dragged the world’s economy is easing. That apparent rebound of growth in the Euro Zone will bring some relief to developing economies, because European markets are key outlets for exports of developing economies.


  • Europe’s improving economic outlook is due to the latest supportive measures and policy adopted by the European Central bank to support the monetary union and the concomitant relaxation of fiscal austerity measures that were needed to address the earlier crisis of confidence, and progress on a banking union.


  • Real GDP of the EU-28 is forecast to expand 1.8 % percent in 2014, a tad faster than last year’s 1.4 percent, led by a lift in the periphery. Asia’s economies will grow 4.5 percent in 2014. Growth in the rest of the world may be slightly shy of the 2013 pace.


  • Inflation lies below targets in all the advanced economies amid considerable economic slack.


Global Economics Update

October 7th, 2014.

A rough ride to normalcy.

The Global economic recovery is loosing steam, becoming unbalanced with inflation and interest rates likely to remain very low. The US are set to be the sole major economy showing signs of strength with its business cycle at least temporarily delinking from the rest of the world.


  • The U.S. economy is riding on strong employment figures in 2014. The unemployment rate is down 6.1 percent and employment has climbed above pre-crisis levels. But the labor force participation rate remains 3 percentage points lower than before the crisis and part-time employment remains high. Despite strengthening domestic demand, labor market slack has kept wage and inflationary pressures under wraps.


  • The euro zone has hit another rough patch, with the three largest economies (Germany, France, Italy) showing no signs of growth. Rising deflationary risks and declining business and consumer confidence have forced the ECB’s hand. While the monetary measures might reduce downside risks, they are likely to have limited traction in reviving growth unless other policies act in tandem to generate supply-side improvements. In Europe, The UK remains the one bright spot set for a period of fairly rapid growth.


  • In Asia, most economies are witnessing a contraction across the spectrum of their economic activities. In japan, growth has been dragged down by the tax increase associated with the deficit reduction plan and lack of credibility in the government’s commitment to labor market and other structural reforms. China’s economy is witnessing a slowing momentum of growth that is mainly due to the government reluctance to resort to its old playbook of investment-led growth fueled by broad-based credit expansion. Instead, the government has opted for a few selective, targeted measures that aim to expand the availability of credit and direct it to more dynamic sectors of the economy. These measures have had limited success especially in reviving the housing sector. Should the PBOC decide to use unconventional monetary measures to engineer a 7 percent growth, it could be at the cost of raising medium-term risks to the financial sector.


  • India stands out as one emerging market economy with positive momentum, although coming off a rough period of declining growth. The Modi’s government, along with a reform-minded and credible central bank governor, appears to have inspired confidence and decrease uncertainty- among domestic and foreign investors. In the absence of broad-ranging structural reforms, India’s growth prospects are likely to remain on shaky grounds.


  • The Brazilian and Russian economies remain stuck in lethargy, with the spillover likely to be felt across the spectrum of the overall emerging market growth. Concerns are also mounting that policy tightening by the U.S. Federal reserve could trigger a flight of capital flows from the more vulnerable emerging markets of those such as Turkey and Brazil that have large current account deficits.


  • Geopolitical uncertainties have contributed to the weakness in business and consumer confidence around the world.Adding to this are concerns that the major economies continue to rely on monetary policy to do the heavy lifting rather than undertaking much-needed structural reforms. The temporary policy space provided by aggressive monetary policy actions has not been used well by most major economies, which have squandered the opportunity to push forward with reforms.


  • The prospect of aggressive monetary easing by the central banks of major advanced economies and some emerging markets raises the specter of further currency tensions.Against the backdrop of a strengthening recovery, the U.S. has so far show a willingness to bear the brunt of the adjustment on the other side of the weakening currencies. Short-term cyclical considerations, the prospects of Fed tightening of policy interest rates, and continued safe haven inflows have all contributed to keeping the dollar strong.


  • The world economy is now being powered mostly by the U.S. growth engine, a situation that is untenable for a sustained and durable global economic recovery. To support more balanced growth, advanced economies will have to start implementing much-needed structural reforms, while central banks should continue to adjust their monetary policies to fit the new economic realities.


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