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Economists optimistic on global economy

01 March 2014

Xinhua, New York :
Economists said here Thursday that they are reasonably optimistic about the global economy this year, noting industrial countries will have better performance than emerging market economies.
"We are reasonably optimistic about the global economy," with stronger performance to be seen in the industrial countries, in particular the United States and to a certain extent Europe, said Lewis Alexander, managing director and U.S. chief economist at Nomura, at a meeting held by the Council on Foreign Relations, a New York-based foreign policy think-tank.
"We do see Asia and China slowing in the first half of the year and then doing better," Alexander told Xinhua at the meeting. But there are differences within emerging markets, with some problem countries like Brazil and Turkey doing worse than others, he added.
Vincent Reinhart, managing director and chief US economist at Morgan Stanley, said "global expansion is ongoing that the G4 countries accelerate and emerging market (EM) stabilizes."
"So our forecast on growth we last published is just a touch slower than what we thought six months ago. But it' s global economic expansion," Reinhart said.
"Some merging market economies will find it difficult to weather increases in US interest rates, but we think that is contained enough," Reinhart said.
Emerging market economies is having "an important stabilization," which enables most of them to weather the increase in rates, he said.
Talking about economic challenges for China, Alexander said "nothing is terribly surprising," but there is no question that there are growing financial imbalances that need to be addressed.
"The pattern of growth (in China), which has been so dependent upon first exports and then investment, needs to change to rely more on domestic demand," Alexander said.
He also said he is "reasonably optimistic over the mid-term" for China, adding that the country is on the track to make those adjustments.
With regards to the U.S. economy, Reinhart attributed the softening of recent economic data mainly to the severe weather conditions the country has lived through over the past month or so. "The basic picture is the economic landscape is frozen over.  It' s not going to thaw for another month and a half till we get a sense of what the underlying momentum is," Reinhart said.
"We think it' s mostly weather, but you' ll have to leave open the possibility that there is a little more slowing in there," he added.
Reinhart also noted that some slowing of recent data was expected after a pretty torrid growth pace of U.S. domestic private spending during the fourth quarter of last year.
Given the weak data, Reinhart and his team at Morgan Stanley had substantially revised down their forecast for the U.S. gross domestic product for the first quarter.
The U.S. economy "has been stuck in a two-percent channel," he said, adding that it will pick up, however, to two-and-three-quarters percent later.
With regards to the so-called "Abenomics" in Japan, economists expressed optimism while warning risks.
Monetary policy, which was called the first arrow of Abenomics, was a huge success, said Takatoshi Ito, professor of the Graduate School of Economics and dean of the Graduate School of Public Policy at the University of Tokyo. "It completely changed the deflationary defeat of the central bank (of Japan) to a proactive inflation targeter," said Ito, who was also the former deputy vice minister for international affairs of Japan' s Ministry of Finance.
"This is a great experiment in monetary economics," Reinhart echoed Ito' s view.
However, economists also pointed out the high level of difficulty in implementing Abenomics.
With the first arrow of monetary policy setting stage, the second arrow of fiscal policy started to bend to consolidation, which created "a policy mix," Ito said.

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