Economy predictions for 2014 – many big things are moving or are they?

While reading New Years first news articles, few global topics from news were rising to top of my mind.

  1. Salary increases in Asia Pacific are corroding the cheap labor driven ecosystem
  2. GDP growth in China is slowing down
  3. Concerns about stability of euro
  4. Rising value of US dollar
  5. Bridging gap between education supply and labor market demand

Forecasts are just forecasts, but any how they will rise topics worth to follow up into our attention. It will be interesting to observe how things have really developed at the end of 2014.

Salary increases in Asia Pacific are corroding the cheap labor driven ecosystem.

Salary increases in China estimated to be 8.5% and in Vietnam 11.5%. As result the jobs might start to return back where they were originally outsourced from?

GDP growth in China is slowing down

Trading Economics forecasts that GDP growth is forecast to be slowing down from current 7.8% level to 6.5% in 2014. 2015 is seen even worse with 6.0% growth level. Expected growth level to be able to maintain needed renewals in China has at least earlier stated to be in range of 7-8% per year. If GDP is growing slower than expected, what are the needed corrections to be done by local authorities to maintain expected development of the country?

Concerns about stability of euro

Georg Soros is pessimistic about euro due to structural problems in system governing it. He is worried about the fact that European government debts are in currency that is not controlled by anyone. Naturally decision making system of euro zone can be seen as risk. It remains to be seen how European ministers can pull their act together with support of their respective nations. Anyhow the debt crisis is not at least as deep as it was few years ago. Is there patience and needed decision power to completely clear the remains of the crisis?

Rising value of US dollar

According to Bloomberg interview Credit Suisse is predicting that euro/dollar ratio is moving from current 1.37 to 1.24 during 2014. They believe that current level (which they correctly predicted against consensus last summer) is not sustainable. This significant change in balance would naturally benefit European export, but at the same time cause problems for companies utilizing natural resources valued in dollars. From stock market point of view impact will be interesting. Can US companies maintain their capability to compete with that predicted conversion rate?

Bridging gap between education supply and labor market demand

This topic has been raised in different forums already long time ago. Different things have been tried like active emigration policy or renewal of education systems. Challenge seem to be the fact that need is changing so much faster than supply. There are also structural issues in some smaller market where too big companies are “misleading” supply to wrong balance. Also the actual amount of people capable to labor market is an issue in some places. This issue in Europe complemented with rising salaries in Asia creates interesting contradiction to be followed up during coming years.

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