Eurozone Still Emerging From Debt Crisis

The structural difficulties that have plagued the global economy over the last half-decade are largely expected to move forward in recovery in 2014.  Progress in the US, Eurozone, and an Asia-Pacific region has been largely evident in regional data releases and at this stage, there is little reason to suggest that any of these trends will be ending anytime soon.  In the Asia-Pacific region broad GDP forecasts are calling for continued improvements.  This growth should be driven largely by export increases out of East Asia and increased demand for products in the Eurozone and the US. 

Potential Risks

“But while the broader expectations are positive,” said Haris Constantinou, markets analyst at TeleTrade, “there is still a variety of factors that could derail the actual performance of the economy if not contained.”  Political risks, in particular, will likely increase the level of uncertainty in regions like Thailand, Indonesia, and India -- and each of these regions is scheduled to complete national elections before the end of the year.  We might see more stability in Asia’s two biggest economies (Japan and China), as they are largely shielded from the internal turmoil that could mark some of these events. 

Relation to the Larger Economies

For these regions, there is less reason to expect increased economic uncertainty or any drastic revisions in the early estimates for growth.  Annual GDP in China is expected to rise to 8.1% in 2014 from 7.8% in 2013.  Japan, on the other hand, is forecast to grow at a rate of 1.8% in 2014, from the moderately slower pace of growth that was seen last year.  These forecasts, however, will depend largely on what is seen in the developed world, and supportive factors can be seen in the fact that the US economy is expected to grow at a rate of 2.5% this year, after the 1.8% increase that was seen in 2013. 

These improvements should be driven by gains in private consumption and investment, and by the continued strength in the housing market.  On the industrial productivity side of things, benefits will be seen with the declining natural gas prices in the US (driven by the booming outlook in shale gas).  This has also had the added benefit of lowering electricity prices and has turned positively the outlook for US manufacturing in 2014. 

Eurozone Still Emerging from Debt Crisis

In the Eurozone, GDP is expected to rise to 0.8% this year (from 0.4% in 2013).  These improvements will likely be driven by growth in the region’s largest economy (Germany).  Additional support should be seen from the UK, which has shown strong signs for a potential rebound.  The consensus forecasts for the 2014 growth performance in the UK show a rise to 2.6% from the 1.4% gain that was seen last year.  All of these factors, support the outlook for Asian-Pacific growth this year as the broader economic recovery should shield the downside risks created by internal political risks in the region.