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The Indian economy is expected to face various challenges in 2014, Standard Chartered said and at the same time added that it forecasts the world economy is likely to accelerate to a 3.5% growth rate in 2014 from 2.6% this year.
World economic growth is expected after a pick-up in economic activity in the US and Europe, ending years of recession and sub-par growth.
In its annual report, this year entitled “Rising East, Emerging West”, Standard Chartered analyses that Asian economy will strengthen but not boom, while China growth will remain stable at 7.4%. More domestically-driven economies such as India, Indonesia and Brazil will face headwinds.
“Western recovery should provide additional impetus to international trade, bolstering the more export-oriented economies across the emerging world. External demand-driven economies with strong links to the global manufacturing cycle, such as Singapore and Thailand, are likely to benefit the most while ASEAN economies are also expected to grow,” report reads.
Standard Chartered also predicts emerging economies outgrowing the Group of Seven developed economies by almost 4% in 2014, even with the US accelerating to 2.4% from 1.7% in 2013 and the euro area emerging from two straight years of contraction to post a 1.3% growth in 2014.
“The broader global economic recovery should make it easier for the US Federal Reserve to start normalising monetary conditions, the report said, reiterating the Bank’s expectation for the Fed to start tapering its quantitative easing programme by June 2014. Although markets could become more volatile in the first half of the year in the run-up to the tapering decision, growth in the second half should pick up once the decision is made; the Bank expects the first Fed rate hike in 2016,” report said.
Marios Maratheftis, Global Head of Macro Research, said: “We expect a better 2014 compared to 2013. The economic recovery has so far been limited to emerging economies, and we expect growth to be broader next year. This is also good news for emerging markets, and we expect them to sustain their outperformance relative to G7 economies. The road will not, however, be free of risks and challenges. The Fed’s expected tapering of quantitative easing is likely to cause market volatility.’’