Credit Suisse points to differing recoveries
New Credit Suisse analysis has pointed to a story of two different global economies having emerged — one covering the US and Europe and the other covering the emerging markets and largely driven by China.
The analysis, released this week, also validated the Australian Government’s handling of the Global Financial Crisis and pointed to the likelihood of at least two further interest rate rises this year.
However, at a global level, the analysis suggested that the era of brief and mild recessions in the US and Europe is over and that the macroeconomic environment in first world countries would be more volatile in the years ahead.
“Also expect the slowdown scares to be scarier,” the Credit Suisse analysis said. “The starting point of high unemployment means that any growth slowdown will feel that much more dangerously close to renewed recession.”
It said that it was also harder to envision a timely and forceful policy response when central bank rates were already low and when there was evident resistance to making budget deficits materially bigger.
However, it said that the emerging markets, with China, India, and Brazil in the lead, were in a different and better circumstance.
“Slowdown ‘scares’ in the emerging markets, as seems to be underway in China now, will not be so scary (for them) because they will help contain the potentially inflationary overheating that their strong economic performance would suggest,” the Credit Suisse analysis said.
AUTHOR
Mike Taylor
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