In the September economic update video for eZonomics, ING head of macroeconomics Maarten Leen asks: “Now which way is up for the world economy?”.
When three speeds lose a gear
Leen asserts that economic change happens fast. Only six months ago, the International Monetary Fund (IMF) was talking about a three-speed recovery: strong growth in emerging economies, a reasonable rate in the US and a tepid rate in Europe.
“The situation is quite different now,” says Leen.
How “emerging” has become “diverging”
Leen highlights the topsy-turvy nature of the world economy. Emerging markets are suffering capital outflows while the prospects for developed economies are improving daily.
He believes that in the US, the Federal Reserve will start tapering “sooner rather than later” as the economy doesn’t need additional monetary stimulus.
In the Eurozone, meanwhile, encouraging economic data means further interest rate cuts “look unlikely”.
All pointing up – trends and expectations
The changed economic environment has led to an increase in long-term interest rates, but rates may have gone too far, too soon. Nevertheless, the trend for growth is up, more modestly in the Eurozone than in the US.