The global economy has entered a strong growth trajectory, and sustainable economic recoveries in regions such as the Euro zone and Japan are adding impetus to the process, says Chris Hart, Absa Group treasury economist.
However, serious global economic imbalances are a blight on the otherwise positive outlook in the global economy.
“Despite the apparent strength of economic growth, global imbalances have continued to worsen. High trade deficits are accumulating in major countries such as the United States, the United Kingdom and Australia, whereas surpluses have mounted in some emerging markets, with China a particular focus.
“The US dollar has already been weakening, despite US’s strong growth performance and the interest-rate advantage that the US enjoys over the Euro zone. The US has continued to hike rates and further rates hikes are expected in the Euro zone,” says Hart.
Notwithstanding the adverse effects of the US on global economic growth, emerging markets have contributed to rising growth levels, with sound fundamentals having been put in place in their economies in the aftermath of various crises that plagued them in the 1990s.
“Risk perceptions of emerging markets as problem areas to be avoided have largely abated and the concern over global financial imbalances has shifted to key developed countries such as the US.” — I-Net Bridge