So what’s in store for 2014?
If you would like to read the full text of Dr. Roubini’s forecast for 2014, published on New Year’s Eve, check it out on the Project Syndicate website here. For those of you who just want the highlights, we’ve summarized and translated them from ‘econ-speak’ for you here:
- Advanced economies (think: Canada, US, UK, Australia) will benefit from the past five years of deleveraging (debt reduction) and monetary policy (low interest rates and generous money supply). Economic performance will slowly chug away and we can expect modest growth…not so doomy at all!
- Emphasis on modest. Dr. Doom is not one to be overly cheery (which is maybe why people tend to trust his prognoses more than the resolutely optimistic forecasts of banks and mutual fund companies). He warns that any growth in our developed economies will be average (less than 2%), at best. Debt reduction among families and corporations is far from over and many still have much work to do in this regard. Governments will continue reigning in the purse strings, so long-term productivity and capital investments could suffer.
- Low risk of any major shocks to the system, or what economists call “tail risks”. Any external threats to the economy – such as Middle East wrangling, eurozone drama, government shutdowns and such – will have less economic impact in 2014 than in the past. (Of course, the biggest shocks are always the shocks we haven’t dealt with before and didn’t see coming, right?)
- The US economy will be helped out by growth in four areas: the shale gas industry, the housing market, the labor market and the trend of bringing manufacturing jobs back to America. There are risks that the US Congress (always fighting) or the Federal Reserve (with unclear policies) could still mess things up.
- The policy of ‘Abenomics” in Japan seems to be working well so far and deflation is finally under control after nearly 20 years. The plan to increase consumption tax may become an issue.
- Although economic growth in China has slowed, it is still expected to hold fast at a rate of around 7% in 2014. Dr. Roubini expects no big crash or drama in the Chinese economy this year, although there will be conflicts between public and private enterprises as new reforms are introduced. Through it all, the middle classes will continue to expand and consume more goods and services.
- European economies continue to slowly grow, while high unemployment and public debt are still big concerns. Fortunately, the big ‘doomsday’ scenarios seem to be behind us.
- Emerging economies in South America and Asia will see their growth rates accelerate to around 5% this year. However, keep your eye on the more fragile economies of India, Indonesia, Turkey, Ukraine, Argentina, Venezuela and Brazil, which are all at risk of any “external shocks” that could rock their markets