Global Economic Outlook - 2014 - Four Seasons of Leverage
■ 1# Bumpy growth relay from emerging to advanced
For the first time post-crisis, we expect advanced economies in 2014 to see an increased contribution to global growth as emerging economies deleverage. Commodity markets will sit at the heart of this dynamic - our strategists look for range-bound markets in 2014.
■ 2# From QE to forward guidance … 2014 isn't 1994
Tapering is no longer a question of if, but when. The Fed has already clearly indicated its willingness to keep rates low for longer. For 2014, expect US yield curves to steepen further and pressure to mount on the more vulnerable emerging economies.
■ 3# Cross-Atlantic uncertainty gap
Policy uncertainty is a key driver of investment and hiring and explains much of the gap between sustainable recovery in the US and lacklustre growth in the euro area.
■ 4# Euro area's lost decade
For the period 2007 to 2018, we expect GDP per capita to be essentially flat, marking a lost decade of growth for the region. We blame much of this on slow policy. The ECB toolbox is not empty, but we see no bazookas unless deflation fears intensify. The risk is that the euro will stay stronger for longer.
■ #5 Reform of Asia giants to deliver slowly
Each has its own specific challenges, but Asia's three giants (China, India and Japan) are at a crossroads where structural reform holds the key. Monetary policy will play a unique role in each case; we see further tightening from RBI, further easing from the BoJ and PBOC FX intervention.
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