We are heading into 2015 with the overall health of the global economy in a better position since the beginning of global economic crisis in 2008. However, the global economic recovery has remained very fragile in the recent years and much weaker than that of recoveries that took place in the wake of previous economic crises, according to the editorial of the current ICCB News Bulletin of International Chamber of Commerce-Bangladesh released today.
The International Monetary Fund expects world gross domestic product growth to reach 3.8 per cent this year, firmly above the 3.3 per cent expansion it estimated for last year. For the leading industrial nations, the United States and Britain are in the vanguard of strong recovery while the euro zone and Japan have all the hard work left to do to restore economic well-being. The uncertainty means interest rates will stay low, which is good news for consumers, who will get an additional windfall from the boost to spending power they get from a collapse in crude oil prices. This is especially true in the US and Britain where employment is bouncing back sharply.
International sanctions and collapsing oil prices are causing massive damage to the Russian economy. In the coming year, these sanctions are unlikely to be lifted, and more sanctions could be added, as the crisis in Ukraine shows no sign of being resolved over the near-term. In the meantime, Russia needs ever-higher oil prices to balance its budget, so the dramatic fall in oil prices in recent months has pushed the Russian economy to the brink of a recession. Experts predict, in 2015 the Russian economy will fall into a recession and, if oil prices continue to fall, this recession could prove to be extremely severe, fueling geopolitical tensions inside Russia and along its borders.
The overall Asia-Pacific (APAC) region outlook for 2015 has been given a considerable boost by the sharp decline in world oil prices in the second half of 2014 as most of the Asian economies are large net importers of oil and gas. Overall GDP growth in the region is, therefore, expected to be around 4.7 percent in 2015, almost same as 4.6 percent growth in 2014. However, GDP in the Asian countries is expected to grow at 5.1 percent in 2016.
However, Asia’s largest economies – China and Japan – will continue to face headwinds in 2015. Japan is struggling with the impact of ageing demographics and very high government debt levels, which limit its long-term GDP growth potential to around one percent per year. China is also facing moderates growth momentum due to weakness in the residential property market, as well as the consequences of rapid credit expansion in the financial system since 2009.
India was in an economic crisis during 2013, but now looks set to be one of the best emerging markets recovery stories for 2015, because of sharp decline in oil prices, since India is heavily dependent on imported oil. Inflationary pressures have fallen sharply during recent months.
The strength of the US dollar and the weakness of many of the world’s other leading currencies could result in a full-scale currency war in 2015. Such a currency war has been predicted in the past, but policymakers have avoided falling into this trap on a number of occasions. However, so many important currencies have weakened in recent months, that other countries may find themselves forced to weaken their own currencies in order to protect their export competitiveness. If a race to the bottom commences, no one will win and the global economy will suffer the consequences. Meanwhile, an even stronger US dollar would have grave consequences for exporters in the United States, hampering that country’s relatively strong economic recovery.
According to experts, global equity markets should stay on a roll this year, fuelled by expansive credit policies of the major central banks. Equities may be in their sixth year of a rally, but the bull market for bonds is four decades old and ripe for a major correction. Low government debt yields offer poor relative returns for investors.
However, despite softening growth rates, experts consider that the Asia-Pacific region remains the leader for global growth and despite short-term headwinds from global economy, Southeast Asia will strengthen to global production base.
