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Opalesque Industry Updates - Union Bancaire Privée's outlook for 2010
After the ice age comes the thaw. The climate at the end of 2009 is confirming that the economic recovery is under way, albeit at contrasting speeds in the G7 and the emerging economies: Asia should be sizzling while the Western growth model is set to remain distinctly lukewarm. Overall, financial markets are getting back on their feet and investment opportunities abound. Emerging markets’ equities still seem preferable to bonds but blue chips and defensive names are increasingly appealing. Whilst a depression has been averted, some other extreme risks are being generated by the drastic reflation policies.
World growth is centered in Asia and emerging countries
Patrice Gautry, UBP’s Chief Economist, clearly states that Asia and emerging countries will continue to drive the world economy in 2010. Beyond a growth rebound, what we are seeing is a lasting shift in the world economy’s centre of gravity towards those countries, whose growth is firm and well-grounded. As for the Western model (the G7), overshadowed by debt and unemployment which are weighing down on consumption, it is clearly treading water and those countries’ growth potential has been badly damaged.
Moreover, the fresh generation of growth drivers, such as new technologies, is struggling to emerge.
Against this backdrop, disinflation still prevails everywhere, even though inflation may flare up here and there. Budget deficits will stay substantial in 2010, especially in developed countries.
“Rising debt is structural in the G7 whereas in emerging countries brisk growth will help reduce it fast”, says Mr Gautry.
The G7’s central banks will have to maintain their accommodating monetary policies whilst remaining careful to avoi...
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