EIU lifts growth forecast for China, says US rate rise unlikely till late 2015

LONDON – In an update of its Global Forecast, the Economist Intelligence Unit has raised its forecast for 2014 real GDP growth in China to 7.3% from 7.2%. “Although economic figures have been soft of late, the Government recently set a surprisingly-high growth target of 7.5% for this year, suggesting that more stimulus may be on the cards to keep expansion at a respectable level,” the EIU says.

Because of tensions between Russia and the West over the Ukraine, the EIU had dropped it forecast for real GDP growth in Russia from 2.8% to 2.0%. It says the US economy is showing signs of reviving after a weather-induced slowdown at the turn of the year.

Of Australia, the EIU expects GDP growth to pick up from about 2.5% in 2013 to 2.8% in 2014. “In the next few years, the broad shift away from mining investment will continue, and instead, commodity exports will play a more prominent role as the previous build-up in capacity delivers its pay-off in terms of export volumes.”

On a wider view, the EIU says that while recent depreciations in emerging markets have been painful for some countries, “they arguably represent a necessary adjustment that will help restore competitiveness lost as a result of the large flows that poured into these markets”.

“We continue to stress our view that an actual rise in the Fed’s official policy rate will not happen until late 2015 at the earliest. This long lag will also reduce the likelihood of a shock to emerging-market currencies.” www.eiu.com (ATI).