Global liquidity to remain extremely abundant: Euler Hermes

Ludovic Subran, chief economist at Euler Hermes.

Despite US Fed hikes, global liquidity will remain extremely abundant due to monetary easing by other central banks (ECB, BoE, BoJ, China), according to Euler Hermes, the worldwide leader in trade credit insurance.
In its updated risk analysis for Q3 2016, the company notes, however, that global growth should reach its lowest level in 2016 2.4 per cent and will in 2017 be below three per cent for the seventh consecutive year, driven up by the US and emerging markets.
"Global liquidity should remain abundant due to further monetary easing by major central banks, despite the US Fed hikes," said Ludovic Subran, chief economist at Euler Hermes.
"However, low rates and monetary policies are far from uniform, so liquidity can move rapidly across the regions, generating volatility and turbulences."
In this context, Euler Hermes identified various alerts coming from the regional tectonic plates: The US economy should benefit from resilient consumption due to increasing confidence and private investment. The stronger economic activity will alleviate the downward pressures on main suppliers of the industrial sector. The expected Fed hikes have limited impact on emerging market currencies. Both presidential candidates call for a fiscal package to support growth - expected to be at +1.7 per cent in 2016 and +2.2 per cent in 2017.
Fine-tuned macro policies in China are aimed at supporting growth, expected at +6.5 per cent in 2016 and +6.4 per cent in 2017. There will, however, be lower demand for foreign goods, negative price pressures and financial stress.
In Europe, growth is expected to remain stable at +1.6 per cent due to a better policy mix. The ECB's Quantative Easing (QE) programme is Europe's biggest safety belt and has doubled to  630 billion euros. The region is characterised by multiple political uncertainties including Brexit, upcoming elections and several points of tension.
Emerging markets will face various situations. Expected growth of +3.8 per cent in 2016 and +4.4 per cent in 2017 will, respectively, contribute to 1.5pp and 1.7pp of global growth. While Brazil and Russia should exit recession, the credit crunch and exchange rate crisis impact several other countries such as Mexico, Nigeria, Turkey or Venezuela. - sandhya@khaleejtimes.com