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Saturday 20.01.2018 | Name days: Aļģirds, Orests, Oļģerts, Alģis

SEB: current global debt is larger than it was in 2007

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatest trends show that common obstacles in the way of global development will reduce in the next couple of years. The world’s central banks continue to implement a stimulating monetary policy, says SEB Bank’s economist Dainis Gašpuitis.

“USA has good economic growth potential. It could reach annual growth of 3.5% in 2014-2015. This will also give Eurozone a larger opportunity to return to economic, financial and political stability. Although, it should be added that growth is likely to be sluggish – 0.8% in 2014 and 1.7% in 2015,” – he told BNN.

According to him, the appetite of the global risk will become stronger. This will benefit the stock market. Industrial enterprises will be able to increase investments and the number of employees. GDP growth will reach 2.4% in 34 Economic Co-operation and Development countries in 2014 and 2.8% in 2015. However, cyclic differential growth will remain among countries and regions. This will increase conflicts in regard to measures implemented in terms of international economic policy.

“Two assumptions will dictate the success of a more or less positive scenario: first of all – low and stable inflation. Second – low interest rate policy of central banks that is based on current macroeconomic processes. USA, Europe and Asia have a large economic surplus. It pressures salary growth and prices of energy resources and raw materials. This provides enough space for central banks to manoeuvre and allows them to concentrate on economic growth and employment. This will ease the implementation of the necessary reforms and fiscal consolidation. Global monetary policy is nearing a crossroads. The often emergency measures will be replaced with a primary objective – the secure an adequate level of inflation and prevent the formation of new imbalances in the financial system. In the next couple of years, political leaders and central bank managers will need to reach an agreement regarding future action in regard to their countries’ macroeconomic policies,” – Gašpuitis predicts.

Eurozone’s crisis will remain being long and complex in its nature. At the same time, countries seem to have improved their resistance to negative events this year. For example, the reaction to this summer’s political events in Greece, Spain and Portugal were mostly insignificant. There are several reasons for this. ECB’s enormous balance liquidates profitability and insolvency risks. Economies of USA and Germany are showing signs of life. This helps maintain South Europe’s export. Even though many crisis-struck countries are expected to show positive signs in their macroeconomic activities, current unemployment and debt factors show that the road to full recovery will take many long years, Gašpuitis says.

“High level of unemployment maintains the risk of political riots and allows Euro-sceptics to strengthen their positions. It is likely that Greece will require a new restructuring in the second half of 2014. Portugal and Ireland will likely need assistance with their debts. There is a rather big risk of political uncertainty due to the upcoming elections in the European Parliament,” – the expert says.

Sweden’s economic growth will reach only 1.2% this year. Nevertheless, the perspective is improving: economic growth is likely to become more rapid in the next couple of years. Strong economic activity of households will be the main engine. The government’s fiscal stimulation measures will bring an additional 20 billion to households – more than 1% of their income. Low inflation rate will cause an increase of annual salaries. Positive economic signals from Germany, USA and other countries with which Sweden usually shows a high correlation mean that export is gradually recovering. Growth rates will increase. They are restricted by the ruling uncertainty in Eurozone. GDP growth will reach 2.6% in 2014 and 3.2% in 2015.

All three Baltic States – Latvia, Lithuania and Estonia – have been the most rapidly growing economies in the EU since 2011. The rapid and balanced growth is expected to continue in the next two years. Private consumption will largely contribute to it. Exports and the need for capital expenses will help maintain GDP growth within the range of 3.5-4.5%, reaching 3.5% – 5% in 2015. If inflation continues to drop this autumn as well, there is a possibility that Lithuania will adopt euro in 2015, Gašpuitis says.


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