Global Outlook 2014 - "Looking beyond taper"
The wave of easy liquidity from US is ebbing, with the Fed having embarked on the much- discussed QE-tapering. With this, the global economic landscape is set to undergo a transition-a little for the better and a little for the worse.
In our Global Outlook 2014, we highlight the major themes that we believe are likely to dominate the global economic landscape this year.
The US Fed has embarked on the much-discussed "QE-tapering" amid improving macroeconomic scenario in US. The global economy now stares at a world where the Federal Reserve curbs its incremental liquidity infusion to the financial markets. Meanwhile, the benign US inflation warrants a case for a gradual exit strategy by the Fed.
Flows to emerging market (EM) economies are expected to slow down on account of Fed tapering and the concomitant rise in risk-free interest rates in the developed world. Moreover, EM economies face structural issues related to productivity and institutional stability. The reform gap needs to be bridged for return to high growth trajectory. In this regard, politics will play a key role with many EMs going to polls this year.
Interestingly, global trade imbalances sharply corrected amid a protracted slowdown post the 2008 financial crisis. Deficit nations adjusted through improved competitiveness and lower investments while exports declined in many surplus nations. However, we believe that trade imbalances remain a relevant theme as the cyclical correction in imbalances risks being reversed given the improving global growth prospects.
Please refer to the attached presentation for the complete Global Outlook 2014 - "Looking beyond taper"
Regards,
ICICI Bank : Treasury Research
Contact:
Sunandan Chaudhuri
+91-22-4259-7525
| 
