Global economy to accelerate in ’14-’15 – ANZ

MANILA, Philippines - Global economic growth will accelerate in 2014 and 2015, rebounding from the medium-term cyclical low point in 2013, the Australian and New Zealand Banking Corp. (ANZ) said.

In a report, ANZ said an improvement in the economies of advanced or developed countries will be the main growth driver.

 Growth in advanced economies will be supported by easy monetary policies, improving balance sheets across most of the private sector, and an easing in fiscal consolidation, the bank said.

Global indicators point to a stronger industrial production in 2014 with China providing a significant contribution.

ANZ also said that emerging Asia ends 2013 “on a slightly firmer footing, having weathered significant volatility in capital flows.”

“The region is ending 2013 with activity on a slightly firmer footing and we expect developed economy growth to be both stronger and more even in 2014. This will prove to be a key support to Asia in 2014,” it said.

Currencies in the region will likely depreciate while inflation will become an issue in 2014.

The Philippine economy is seen to rebound from the devastation of both the earthquake and super typhoon that occurred late in the year to register a 6.8 percent growth rate in 2013 to 6.9 percent in 2014, and 6.8 percent in 2015. Much depends on how the rebuilding and reconstruction is undertaken.

Policy rate will remain at 3.5 percent in the first semester of 2014, but the Bangko Sentral ng Pilipinas (BSP) is expected to raise it by 25 percentage points at the start of the second semester. It may likely move up to four percent by 2015.

The peso is expected to remain at the 43.40 to 45:$1 range for the next two years.

The Philippines, and the rest of emerging Asia will experience direct and indirect impact from dollar bonds. Higher interest rates in China will lead to higher cost of borrowing for Chinese corporates, which will then percolate into the dollar bond market.

“We think Korea, Hong Kong, Indonesia and the Philippines’ dollar bond markets will bear the most impact. And the rise in dollar borrowing costs for the same nations may result in an increase in local currency bond yields as well, due to dollar bonds forming a significant proportion of the total borrowing via bond markets in these countries,” the ANZ said.