Global economy predicted to grow 3.7pc in 2014-2015: NIESR

LONDON, Feb 8 (Xinhua): London economics think-tank the National Institute of Economic and Social Research (NIESR) Friday forecast that the world economy would grow by 3.7 per cent in 2014 and 2015.
Angus Armstrong, director of macro-economic policy at NIESR, said, "We expect world growth to pick up to 3.7 per cent this year and next year, which is an improvement on 2013's 3.1 per cent."
Armstrong said this was an improvement on recent years but he characterized it as "moderate and uneven" and "sluggish by past historical standards."
A lot of the issues of concern about the world economy remained.
Growth prospects have improved in advanced economies, particularly in the US, but have deteriorated in a number of emerging market economies.
Armstrong said emerging markets now represented about 40 per cent of world output on PPP basis, and problems in nations like Indonesia, Russia, and Argentina could have an impact elsewhere.
"The key issue will be the feedback effect this has on the rest of the world economy," Armstrong said.
Armstrong said that he expected unemployment rates to remain high, with a simple average of unemployment in the nations covered by NIESR at 9.6 per cent.
"This is extraordinarily high," said Armstrong, "especially after two years of reasonable expansion."
The corollary of that is that there are still under-utilized resources, and downward pressures on inflation.
"On a world level, inflation will be at or below inflation targets," said Armstrong.
Armstrong said the adjustment in the euro area would be more balanced and less costly if inflation were at its target on average (currently 0.7 per cent against a target of 2.0 per cent), and above average in the core countries.
"Inflation of 0.7 per cent makes it hard for countries in southern Europe to regain competitiveness," he said.
With the exception of the US, there has been only a small reduction in private sector debt burdens, and this adjustment would be considerably more difficult in a deflationary environment, said Armstrong.
Better growth, very low borrowing costs and little pricing power in goods markets may lead to further appreciation of asset prices, he said and this could complicate monetary policy stances and the associated forward guidance.