Hope and Hurdles in 2014

NEW YORK – The world economy has experienced another year of subdued growth, having failed to meet even the most modest projections for 2013. Most developed economies continued trudging along toward recovery, struggling to identify and implement the right policies. Meanwhile, many emerging economies encountered new internal and external headwinds, impeding their ability to sustain previous years’ economic performance.

Nonetheless, some positive developments in the latter part of the year are expected to gain momentum through the coming year. Indeed, according to the United Nations, the world economy is likely to grow by 3% in 2014 – notably stronger than the 2.1% annual rate estimated for 2013.

Among developed countries, the eurozone has finally extricated itself from a protracted double-dip recession; the pace of growth in the United States has continued to accelerate; and Japan’s expansionary policies seem to be working better than anticipated. For the first time since 2011, all major developed economies are expected to align themselves on the same upward trajectory, possibly triggering a virtuous cycle that lifts the entire global economy.

While the US Federal Reserve is poised to begin tapering its bond-buying program – so-called quantitative easing (QE) – developed-country monetary policy will remain largely accommodative in the next two years, creating a salutary environment for continued strengthening of the financial sector and the real economy. Moreover, European and US fiscal-austerity programs are expected to be scaled back, if not terminated, in the coming year, alleviating the concomitant drag on growth.