Introduction
World Economic Forecast.
According to the World Economic Forum 2014, leading financial experts told participant that that the global economy was cautiously optimistic. Even though the global economic activity has strengthened; and global growth is expected to be 3.7 percent in 2014 and 3.9 percent in 2015, old risks are still present and the coming years might bring volatility. Therefore how governments plan to recover from the economic meltdown might determine whether there will be inflation or deflation. In emerging economies exports are the main drivers of growth activity; demand of goods from the advanced economies will lead to growth although domestic conditions may also interfere with the growth. Although many emerging markets have started to benefit from increased external demand their domestic growth has been slower than expected, this has been attributed to political uncertainty, policies and bottlenecks, which has affected investments negatively. These countries include Brazil, Russia, Middle Eastern countries and North African Countries. (World Economic Outlook Update, January 2014)
In the U.S, federal budget deficit has fallen and banks are recapitalizing and working off bad loans. There will be no additional fiscal austerity at the federal, state and local government level meaning that there will be no budget cuts, spending will likely remain the same or go up stimulating the economy, and accelerating GDP from an average of 2.2 in the last four years to 2.4 in 2014 and 3.2 in 2015. (World Economic Outlook Update, January 2014)
IMF forecasts’ that Japan will grow 0.4 % to 1.7% (Tally 2014). The economic growth in China is expected to moderate from 7.7 to 7.6% in 2014. This is mainly due to the rising cost of capital and slowing credit growth caused by policy measures. India’s growth is also picking up due to stronger external demand.