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Fidelity - Outlook 2015: Global macro environment

Three main themes are likely to shape the global macro landscape in 2015: disinflationary growth, monetary policy divergence and growing emerging market (EM) differentiation.

Disinflationary growth

The effects of a disinflationary shock from lower commodity prices seen this year should support global growth in 2015, with lower inflation not only boosting global consumption, but also enabling central banks to keep monetary policy loose.

At the country level, we expect the US to continue growing at a solid pace, on the back of renewed housing acceleration and stronger consumption, as lower energy prices provide a boost to real disposable incomes.

Monetary policy divergence

The outlook for the euro area and Japan will remain challenging. In Europe, we expect a moderate growth pick-up, supported by the weaker euro, improving external demand, easing from the European Central Bank (ECB) and a moderately lower fiscal drag. The ECB is also likely to introduce further supportive measures should the cyclical picture deteriorate.

In Japan, the Bank of Japan’s (BoJ) easing measures could help boost inflation, but it is unlikely to have a meaningful impact on the real economy. Monetary policy is not a silver bullet, and both Japan and Europe must also address the issues of low productivity and low growth expectations through structural reform.

The divergence of central bank monetary policy around the world has become clearer this year. We expect this theme to continue in 2015, but there are limitations to how far it can go. Currency and interest rates are likely to act as equilibrating mechanisms, constraining the impact of differences in central bank policy. As the BoJ and ECB continue on their easing paths, further US dollar strength would contribute towards moderate tightening in US financial conditions and reduce immediate pressure to hike rates.

Growing emerging market (EM) differentiation

In the emerging world, the recovery has been sluggish and uneven and this theme is likely to become more pronounced over the next year. EM growth will continue to be influenced by a variety of factors, including exposure to the US and China, dependency on commodities and progress on structural reform.

Broadly speaking, emerging markets with close links to the resilient US economy, rather than China, are likely to deliver better growth outcomes, with the likes of Mexico and Korea therefore better positioned than the likes of Brazil and Indonesia. Commodity dependence is another key factor. Net importers like India and Thailand can benefit from lower prices, while exporters may continue to suffer.

Perhaps most important to longer-term growth success is structural reform. EM countries are at a crossroads: face up to the urgent structural reforms needed to improve growth prospects internally, or risk spiralling further into a state of sluggish growth. It is the progress made here that will help separate winners from losers over time.

As always, there are risks to this outlook. These include a hard landing in China, further geopolitical tensions, and accelerating US inflation leading to earlier-than-expected Fed tightening.

A hard landing in China would pose further problems for commodities and global growth more generally, impacting emerging markets to varying degrees. Geopolitical problems – particularly the Russia-Ukraine conflict and Middle East tensions – also have potential to continue and could weigh on specific regions next year.

Anna Stupnytska, Global economist for Fidelity Solutions, December 2014

Please note that these are the views of Anna Stupnytska, Global economist for Fidelity Solutions and should not be interpreted as the views of RL360°.


Anna Stupnytska

Global economist, Fidelity Solutions
December 2014

Please note that these are the views of Anna Stupnytska, Global economist, Fidelity Solutions and should not be interpreted as the views of RL360°.

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