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Who will be the main engine of the global economy in the next 5 years?

Commentary by Vasile Trotiuc, Corporate strategy analyst at Luvata:

The results are surprising from the first glance only.

US instead showed a positive dynamic of PMI starting Q4 2012 and looks quite strong at leading indicators, but September 2013 news headlines about the gravity (or not) of the budget crisis. On the other hand, one can also notice huge efforts coming from the US Administration aiming to attract foreign investors. This can be interpreted in a way that the impulse given to economy by the Fed, does not bring the results good enough for a sustainable growth. It looks like the Fed stimulus is mostly a concern for other countries, e.g. India and Brazil, and there is a doubt, that low interest rates still continue bringing fuel to the US domestic economy.

Taking into consideration the timing of the poll, September – early October 2013, when everyone was speaking about China’s growth slowing down, it comes of no surprise, that BRIC category (doubtfully driven by China) has only come second in the race. India disappointed, when even a small allusion on the ease of US economic stimulus caused significant outflow of foreign investments and a free fall of Indian rupee. Despite huge infrastructural projects for the Olympics and FIFA World Cup (which the rumour says are mostly delayed), Brazil faced similar problems. Russia is set for a “ten year tight budget” failing to perform structural reforms in the previous years of growing oil prices, and remains highly exposed to crude oil price, not having any internal incentives to refine domestically.

EU continues to show mixed signals and unsurprisingly came 3rd in the poll. UK and Germany demonstrate clear signs of recovery and a positive outlook, whereas other member states still struggle with cutting their budgets and/or increasing taxes for the riche (no spelling mistake here!). European Central Bank tried to encourage growth by cutting main refinancing rate to 0.25% with not much headroom remaining though. This measure looked as a front-running step, demonstrating ECB’s concerns about EU economies.

Japan is set for another try for deep reforms in tax and monetary policy, which in case of political succession are expected to bring positive results.

8% of our respondents believe in some hidden gems of global economy. Could be a good investment insight to find out, all welcome.

 



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