Global economy to grow at steady pace this year

The global economy will continue to grow at a steady pace in 2016 and there is no need to worry about falling oil prices, volatile Chinese market and a collapse in the stocks and bonds of commodity-producing emerging nations, says an expert.  
The global strategist of Societe Generale's private banking arm Xavier Denis said low oil prices will continue to give a boost to US consumers, however consumer price index is expected to rise as wage pressures begin to emerge in the US and the impact of the slump in energy prices fades.  
"The US has been clearly the strongest developed world economy, also lifting those countries most exposed to strong American momentum. The eurozone and Japan should also expand next year," Denis told Khaleej Times at a media briefing.
He said private consumption remains robust and should be the main driver of US growth in coming quarters.
"Housing recovery should also lift the US business cycle. On the other hand, the strong US dollar will continue to cap headline inflation," he said. 
Sluggish global trade
Denis said world trade continues to slow. Global trade growth has been anchored below its historical average since the 'great recession', offering further evidence of tepid world economic recovery.
"Decreasing global demand, especially due to slowing emerging markets, weighs on the outlook for world trade," Denis said while explain the macro economic outlook for 2016.
He said low commodity prices should continue to weigh on inflation, and central bank monetary policy should remain accommodative overall.
"Commodity importer countries will still benefit from lower bills, while commodity exporters will continue to suffer."
To a question about 'recession fear' this year, he said it is unlikely that 2016 is a repetition of 2008 crisis as most of the legacy of the financial crisis has been addressed by policymaking, cleaning up of banks' balance sheets and household balance sheets. 
Eurozone recovery, China slowdown
About the eurozone, he said single currency bloc has begun to recover from the slowdown in late 2014, helped by the weaker euro, lower energy prices and less fiscal tightening - we anticipate real GDP growth around 1.6 per cent in 2016.
"Germany is showing steady signs of improvement [unemployment at 6.3 per cent in December], helping lift the rest of the eurozone," he said.
With banks easing credit standards, lending activity is finally showing signs of recovery. Lending to the private sector is edging further up.
Denis said China's slowdown is unlikely to derail global growth due to fine-tuned measures on fiscal and monetary policy.
"The whole of emerging Asia should benefit from Chinese measures to support growth," he said, adding that more reforms would be required to prop up growth and lift investor sentiment. 
India top pick
Denis said zero interest policies in the developed world have bolstered debt issuance from emerging markets corporates. He said most emerging market economies face major headwinds i.e. commodity price downturn, falling currencies, China's structural growth slowdown and macro imbalances.
"Only a fraction of emerging market countries are immune to the current adverse conditions. A cautious approach to these markets is advised.
"India, currently our top pick within emerging markets, should be driven by ambitious economic plans, strong profit outlook and accommodative monetary policies," Denis said.
To a question about his best investments this year, he said Japanese and Indian stocks should be considered as both are net energy importers and will benefit from low oil and trade at attractive valuations for investors.
- muzaffarrizvi@khaleejtimes.com