Markets & Economy
Is the global recovery on track?
April 21, 2014
Catherine Gordon: Joe, in light of the economic, fiscal, [and] geopolitical challenges that it's facing, how well can the global economy perform for the remainder of the year?
Joe Davis: I think it can actually perform fairly well. I mean our theme going into the year was one of resiliency particularly in the developed markets. So we're seeing positive growth in Europe for the first time, and at the same time the United States continues to perform adequately, on expectation for more of the same for the rest of this year. And even in Japan, weve seen stabilization and actually some recent strength.
So I think looking forward, it's one of modest and decent growth despite the challenges we're seeing in the emerging markets, [including] the intentional and in our mind permanent slowdown in China—another volatility we're seeing in emerging markets. So the global recovery should very likely continue to follow the outlook weve had for a number of years, which is one of a modest recovery in the face of deleveraging a high consumer and/or government debt in the various parts of the world.
And that also underscores the very accommodative stance of central banks, but not only in the United States, but throughout. So it's one of modest improvement. But there are still challenges. But I think it continues to underscore some of the vigor, particularly in parts of corporate America.
Catherine Gordon: We also asked Vanguard's chief economist in Europe, Peter Westaway, what he thought about the global economy and here's what he had to say.
Peter Westaway: I think the one important point to make though is that as in other recoveries from these financial crises that we've seen in the past, there does tend to be a much slower period of a return to what we might think of as normal levels of growth. The so-called deleveraging cycle, where some of the excesses that governments and the private sector have built up in the years before the crisis, they then need to be worked off. And that deleveraging necessarily means that spending takes a little bit longer to get back to what we would have previously thought of as normal levels. And during that time, it's necessary for policymakers to maintain quite a degree of stimulus, which is why we're still seeing monetary policy very much in an accommodative mode.
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Vanguard economists assess the outlook for 2014
Vanguard Chief Economist Joe Davis and our chief European economist, Peter Westaway, give their thoughts on how the global economy is likely to perform for the rest of 2014.
Also of interest:
- What's ahead for interest rates?
- Time for optimism in Europe?
- Where are emerging markets headed?
- Is China headed for a slowdown?
- How to manage "country risk"
- All investing is subject to risk, including the possible loss of the money you invest.