Macroeconomic Risks

2014 Outlook:


  • EUROPE: TIMID RECOVERY IN 2014
    Although signs of cyclical weakness are still perfectly evident (especially in the labour market), the recent economic recovery could accelerate during 2014, through an easy monetary policy and increased purchasing power (resulting from lower inflationary pressure). Notwithstanding these encouraging signs, 2014 will continue to be a transition year for the eurozone periphery, especially on account of the labour market remaining depressed and austerity measures that will continue to curtail internal demand. However, the recovery will be stronger elsewhere in the European Union, especially in Germany.
     
  • UNITED STATES: IMPROVEMENT IN OUTLOOK
    After slowing down in 2013, the American economy should undergo a rather robust acceleration in 2014. With significant improvement in economic fundamentals, growing importance of unconventional energy sources (shale gas/fracking oil) combined with a more relaxed political climate in regard to the debt ceiling represent the principal bases for the American recovery.
     
  • CHINA: SUBSTANTIALLY STABLE GROWTH
    The recent trend data and forecasts issued by leading economic analysts seem to converge on a 2014 GDP forecast that is substantially consistent with the last two years or, in the worst case, in slight deceleration. The structural reforms decided during the third plenum of the Central Committee of the Chinese Communist Party will continue to drive the country towards an economic model based more on consumption and a slow, but steady deregulation of the financial system. While no particular risks are perceived at the cyclical level – partly on account of the ever-increasing attention dedicated by the government to achieving a minimum growth rate – over the medium-long term the country must find a permanent solution to certain endemic problems such as the excessive debt of local governmental entities, a possible bubble on the real estate market and, in regard to society, an ageing population, urbanisation and pollution.
     
  • SOUTH AMERICA: STABLE OUTLOOK, NOT WITHOUT RISKS
    The Brazilian economy should stabilise at its present growth levels. Over the short term, the principal growth driver will continue to be the stimulus generated by the upcoming World Cup football event. The principal risk factors include the impact of changing United States monetary policy on the Brazilian currency and, indirectly, consumer price pressures. The risk of possible further depreciations is growing in both Argentina and Venezuela.
     
  • RUSSIA: DISAPPOINTING GROWTH AHEAD
    The prognosis for 2014 Russia Federation economic outlook remains rather grim, as the GDP growth is likely to come in well below the already disappointing growth figure recorded in 2013 (+1.3%). Indeed, there were a number of rather endogenous factors (among others: substantially stable outlook for energy commodities; high inflation, due to weaker Ruble, that is cutting into household purchasing power) already aligned to ensure that Russian economic growth will disappoint in the near term even before the threat of economic sanctions on Russia arose. Such ongoing tensions between Russia and the international community over Ukraine has undoubtedly increased uncertainty over the short- to- medium-term economic outlook, with a full-year recession still on the cards should the conflict exacerbate.
     

Last Revised: 20 Jun 2014