SINGAPORE – Asia’s rapidly developing economies will lead global growth in 2011 despite cooling slightly from last year, a Reuters poll showed, far outpacing the uneven recovery seen in rich-world peers.
The survey of around 500 economists across the world showed China again topping the economic expansion charts this year, as well as promising signs that the United States’ economic revival will gain traction this year.
Still, most of the 13 Asia-Pacific economies covered in the poll will likely see growth cool in 2011 as policymakers there step up efforts to fight inflation, while the recovery in Europe and Japan shows few signs of gaining momentum anytime soon. Economists expect global economic growth to slow to 4.2 percent this year from around 4.7 percent last year, before picking up slightly to 4.3 percent in 2012. “The prospects for growth at the global level this year are still pretty encouraging,” said Mark Miller, global macroeconomist at Lloyds Bank Corporate Markets.
“The basic assumption that China effectively drives the rest of emerging Asia, which in some ways props up Western exports to these countries, is still a very pertinent theme.” The double-digit rates of growth seen in China last year will likely slow to around 9.3 percent this year, while competitor India should see growth accelerate to 8.5 percent in the fiscal year ending March 2012. While growth rates in the United States will fail to get anywhere near that level, economists in the latest poll sounded more optimistic about the durability of the recovery in the world’s number one economy. They saw U.S. gross domestic product rising by 3.0 percent on an annualised basis in 2011, up from 2.7 percent in a similar poll in December and 2.3 percent in a November poll.
“For our part, the upgrade in view has been due to better data, more fiscal stimulus in 2011 than we had expected – particularly the payroll tax cut which was not anticipated – and analysis that suggested households have now increased saving enough,” said Andrew Tilton, economist at Goldman Sachs in New York. Europe and Japan still look likely to lag. Although the euro zone’s biggest economy Germany has been performing strongly, there are few signs that will translate into a growth spurt for a bloc beset by a sovereign debt crisis and austerity measures in its periphery. Both the euro zone and Japan, the latter mired in deflation, will likely share modest quarter-on-quarter growth rates of 0.5 percent or under for at least the next 18 months.
Central bankers in emerging market economies look likely to find taming inflation a tougher task this year, as forecasters largely upgraded their outlook for price growth from the last quarterly poll in October. “Later this year, Asian policymakers are going to have to be much more aggressive to get inflation under control and the consequence of that will be weaker growth,” said Robert Subbaraman, Nomura’s Asia chief economist. Chinese inflation is expected to quicken to 4.3 percent this year – a much faster build-up of price pressures than expected previously. In India, where price growth which hit an annual 8.43 percent in December, economists expect only a gradual decline of inflation pressures.
Analysts also upped their predictions for inflation in the U.S. and the euro zone. In Britain, inflation has spiked to almost twice the Bank of England’s two percent target that analysts say will not be met until 2012. Unlike China, Britain’s high inflation results from a combination of tax hikes and a depreciated currency, not from asset bubbles and economic growth, which in Britain’s case will be tepid for the foreseeable future.
While austerity measures will curb growth in Britain and the euro zone, the latter must deal with another risk in the form of a sovereign debt crisis that afflicts its peripheral members like Ireland, Greece and Portugal. While Ireland and Greece have already sought outside help for funds, a strong majority of economists reaffirmed their view that Portugal will capitulate to market pressure and be forced into accepting bailout money.
