The assumption that the global economy will see a gradual recovery in 2014, led by growth acceleration
in the major OECD economies, remains valid. This is despite softening economic indicators at
the beginning of the year, particularly in the US and China, which have highlighted some fragility in the
on-going momentum. However, some of this might be explained by temporary factors such as the
extremely cold weather in the US and reduced economic activity due to the Chinese New Year holiday.
Additionally, anticipation of a sales tax increase in Japan, the on-going challenges in domestic
consumption in Brazil, and recent developments in Ukraine have added to this year’s growth risk. On the
positive side, the recovery in the Euro-zone, although gradual, seems to be on track and India’s
economy also appears to continue recovering from the low growth levels seen in the past year.
The global economy is expected to rebound from last year’s GDP growth of 2.9% to 3.5% in 2014, unchanged from the initial forecast. OECD economies will contribute most of the increase,
with growth improving from 1.3% in 2013 to 2.0% in 2014. As the underlying growth dynamic gained
traction in the US in the second half of 2013 and an agreement on fiscal issues has been achieved,
US GDP growth is now forecast at 2.7% this year, compared to 1.9% in 2013. Equally important for the
OECD’s recovery is the rebound in the Euro-zone. The most pressing sovereign debt issues in the
peripheral economies have been overcome and supportive measures for some vulnerable parts of the
banking system make it more likely that the region will reach growth of 0.8% this year, following last
year’s contraction of 0.4%. In Japan, stimulus efforts had a positive impact on GDP growth in 2013 and
some of this momentum is expected to continue into the current year, although the effect of the April
sales tax increase remains uncertain. Growth is expected at 1.5%, slightly lower than the 1.6% seen in
the previous year.
China is now forecast to expand at 7.6% in 2014, almost at the same level as in the past year. China
recently announced its growth target of 7.5%. Achieving this target will depend on balancing growth
requirements with efforts to enact planned reforms, particularly in the financial sector. India is on the
path of recovery from relatively low growth in 2013 and is forecast to grow by 5.6% in the current year,
with most recent indicators confirming this forecast. The Russian economy is expected to see 1.9%
growth this year, although recent developments have highlighted several uncertainties.
This rising risk of a slowdown in growth in the emerging economies has been mirrored in the foreign
exchange markets in recent months. This has been partly triggered by the US Fed’s tapering of
monetary stimulus, leading to a reassessment of emerging market fundamentals, which resulted in an
outflow of foreign investment. With expectation of a further reduction of US monetary stimulus and a
more accommodative approach by central banks in Europe and Japan, a likely appreciation in the
US dollar may impact commodity markets globally.
While many challenges remain, the expected improvement in the global economy is also resulting in
higher oil demand as growth in global oil consumption is forecast at 1.1 mb/d in the current year
compared to 1.0 mb/d in 2013. In light of the prevailing uncertainties, a key determinant for this increase
in world oil demand will be the pace of growth in the emerging economies.
