Global economic growth relatively good, not uniform

The economic outlook for large economies show positive signs of growth, according to a presentation at PMA Fresh Connections in Rotterdam last week, given by Julian Marcilly, chief economist for Coface, on international trade. While countries in the European Union and the United States benefit from low oil prices, emerging countries – like Brazil, Russia and China – aren't seeing as much growth.

Julian Marcilly, Chief Economist from Coface, during the presentation "Shifting Trade Winds: Geopolitics, Global Trade & You".

“In the last quarter, we upgraded our assessments of a lot of the advanced economies in Europe,” said Marcilly. “At worst, we didn't downgrade anyone, even countries which we weren't as optimistic about. But for emerging markets we expect growth to be a little lower.”

That general assessment is largely due to Marcilly's outlook on the largest of the emerging markets: Brazil, Russia, India and China.

Brazil has suffered from infrastructure weaknesses, high labor costs, a shortage of qualified workers and lower consumption due to inflation. The level of household debt is discouraging, and it has also contributed to lower consumption.

"The slowdown of the Russian economy started long before the political crisis," stated Julien, "We have seen a very strong decline in investment over the last few years. Looking at capital outflow shows that both local and foreign investors don't trust the country any more in terms of investment. Of course, this was worsened by the political crisis which later ensued and they currently find themselves in a currency crisis."

Russia has suffered what Marcilly termed a triple shock of economic, political and oil price troubles. Capital investment was down even before political issues came to the fore, and Russia's dependence on oil sales has hurt it now that oil prices are low. There were positive signs last year, as government spending on pensions and wages bolstered consumption, but that was a temporary measure that didn't address the core issues that are likely to hold back growth.

“The situation is not as negative in China,” said Marcilly. “There's still growth, but that growth is slowing.” Past credit excesses produced a glut of supply, especially in sectors related to investment in infrastructure. There are also signs that Chinese corporations are over-indebted.

“We expect little growth for emerging markets,” said Marcilly. “Mainly on the back of large emerging markets.”