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Alternative Market Briefing

There may be recoupling in 2014

Monday, December 09, 2013

Benedicte Gravrand, Opalesque Geneva:

According to Julius Baer Group Ltd., an international Swiss private banking group, the global economy will be much more in sync in 2014.

"Just when economists and investors have become used to this type of imbalances and changes in growth patterns (from the recent financial crises), the harbingers of a new era are on their way," says Christian Gattiker, Head of Research in the bank’s latest Insights report. "In fact, the decoupling seems to be increasingly turning into a re-coupling." As indeed the economic growth differences between BRIC countries and the mature economies are shrinking.

In the western economies, a lot of healing has taken place of late, while in many of the emerging markets, the business model is resulting in unsustainable current account deficits.

Julius Baer’s outlook is that the USA, Europe and Japan will grow by 1% to 2.5%, while the emerging world should grow 'merely’ at mid- single-digit rates on average.

But some of the imbalances will need correcting; this may be disruptive, and economies that have current account imbalances may see currency crises, Gattiker notes.

The U.S., Europe and Japan’s monetary policies may not give rise to inflation, after all, due to overcapacity. "Out of 21 major economies (mature and emerging) we do not see any one of them currently running at their potential growth rate," the repo......................

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