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Global growth set to improve: StanChart

MANAMA, April 8, 2015

Standard Chartered has said it expects global growth to improve this year, although in many parts of the world it may not feel that way, with the risk of a policy mistake that could derail progress.

In a statement, the bank said its economic theme for 2015 - 'Rekindling animal spirits' - is still very much in play as the second quarter approaches, said a report in the Gulf Daily News (GDN), our sister publication.

Global growth forecasts from the World Bank and the IMF were revised lower earlier this year, but the bank said its economists are not revising their forecasts significantly, with market consensus now moving closer to its view.

The rapid drop in the value of the euro is a significant development in the first quarter this year.

Although positive for the euro area, this will have broader implications for the world economy, it said.

The euro area is already running a significant current account surplus and a weaker euro could widen this surplus further, raising the risk of lower growth elsewhere.

The bank said its economists stated at the start of the year that India could be one of the positive surprises.

The flexibility policy makers have is a positive, and so is the latest budget.

India faces the opposite type of rebalancing than China.

Whereas China needs and is trying to raise consumption versus investment, India needs to do exactly the opposite.

Growth has been mainly consumption-driven, and there is a need to improve infrastructure.

Standard Chartered said that this year, it expects investment in India to outgrow consumption with the budget doing a good job of balancing limited resources and the needs of the economy.

The focus will be on key infrastructure projects such as railways and roads, which are growth drivers.

According to the bank's head of macro research Marios Maratheftis, the many moving parts in the world economy are creating a relatively risky and somewhat uncomfortable environment.

“The weakness of the euro and the possibility that this could widen the euro-area's current account surplus is an additional complication.

“Policy will play a key role, especially interest-rate policy in the US.

“We expect the Fed to be very careful with increasing interest rates, and this should be supportive of our view that growth this year should actually improve compared to last year.” - TradeArabia News Service




Tags: growth | global | standard | improve | Chartered |

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