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Is the Global Economy Going Broke?

Published: 31st January 2016 05:31 AM  |   Last Updated: 31st January 2016 05:33 AM   |  A+A-

Is the global economy going broke? That’s a $7.8-trillion—the wealth investors lost in the past 20 trading sessions or so—question. Advice, forecasts, and warnings of all shades are everywhere. Some of them calming, the others exactly the opposite. The Sunday Standard brings to you the smorgasbord of the world economy, countries and commodities that are in severe ‘bear pits’ and how worried or not worried we should be

Anubhuti Sahay,

Chief Economist, Standard Chartered

Global economy

The macro economic outlook is subdued. No economy is booming. However, we do not expect a global recession. We think global growth is likely to remain flat at 3 per cent in 2016

China’s Health

Undoubtedly, 2016 will be challenging for China and will slowdown further compared to 2015. The bigger picture of China’s economic re-balancing is the services sector, which contributes over 50 per cent to its GDP. We expect more policy easing by China

Crude prices

Lower oil prices can slowdown FII flows, remittances from oil-exporting countries and increase the servicing cost on external debt. It can slowdown investment recovery and a negative spillover on consumption cannot be ruled out if investment recovery and job creations slows down

Rupee fluctuation

Weakness in INR reflects widespread global risk aversion. Given relatively better fundamentals of the economy, we would expect INR to still remain an outperformer

 

Madan Sabnavis,

Times.jpgChief Economist, Care Ratings

Global economy

In the decoupled process, emerging markets will grow slower with China leading the way here. But developed nations will continue to move upwards.

China’s Health

High investments slowed down and consumption is lagging. Investment is unlikely to rise without corresponding increase in consumption power. Besides the financing of the same has been through state banks where NPAs have increased. Therefore, growth will be slow.

Market rout

I do not believe that stock market movements are indicators of a crash. During earlier recessions, markets tanked. Now, have moved down temporarily as the Chinese shock is short-term in nature.

Crude prices

This will affect the Gulf nations and other producers, where oil dominates the GDP of the country. Our remittances and other invisible flows will be impacted as there will be less money for us

Rupee fluctuation

Will have limited impact as our fundamentals are firm with reserves of $350 billion or so. But individuals seeking foreign education, holidays or health service will be affected

 

Debopam Chaudhuri,

Timesa.jpgChief Economist, ZyFin Research

Global economy

Sluggish world trade and slowing manufacturing indeed points that the much-coveted economic recovery is still a distant reality. The Greek debt debacle continues, and China added to volatility surging up financial stress indicators

China’s Health

It’s not on the verge of a collapse. Weak demand, low inflation and rising debt are intermittent issues in any economy of that size and can be tackled with a loose monetary policy. Its robust $3-trillion reserves should help them tide the wave

crude prices

Historically, a decline in oil prices have on an average boosted world GDP. But this time, results aren’t visible. Budget deficits in oil nations have prompted economies to cut spending. However, when oil prices recover, the rise could be quite steep

 

Suvodeep Rakshit,

Timesc.jpgEconomist, Kotak Institutional Equities

Global Economy

The world will certainly see slower growth. Emerging economies will be the laggards. Commodity price falls, lack of structural reforms in emerging nations will keep growth outlook significantly weak.

China’s Health

The over capacity built-up over the past needs correction and slower growth should be expected. The PBOC and the Chinese government still have some ammunition to avoid a severe hard landing and guide the economy on a slower but more sustainable growth path

Crude prices

The fiscal strain on the oil-exporting economies would be a drag. The crash in commodity prices would mean most of the export-oriented economies would slow down, which would pull down global trade and demand

Rupee depreciation

Compared across a basket of currencies (REER terms) INR remains overvalued, which provides some room for gaining trade competitiveness. Rupee depreciation will be a threat if commodity prices reverse. But INR is in a much better position compared to other currencies

 

Aditi Nayar,

Senior Economist, ICRA Ratings

a.jpgFactors like the expectation of further rate hikes by the US Federal Reserve, in conjunction with a slowdown in Chinese economic growth, may continue to exert pressure on emerging market currencies. Unless the rupee adjusts, the loss of competitiveness may intensify. While a rupee depreciation poses a risk to the achievement of the RBI’s medium-term inflation target, its impact would be offset by the prevailing softness in global commodity prices.


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