The major economic concern nowadays is not the end of quantitave easing but the beginning of the interest rates rise by Fed. In last week’s meeting, the central bank kept growth prospects for 2015-2016 near 3% and reduced unemployment forecast to 6%, so everything makes us assume it will continue the current monetary path. The US is very likely to maintain a strategy of stability in tapering until zero by the end of the year, a probable increase of rates not before mid 2015 and, above all, upkeep of medium and long term interest rates expectations in the moderate inflation context.
Experts believe the normalisation of monetary conditions could particularly impact on emerging economies rather than bonds purchase by the central bank. In any case, the current financial stability mustn’t hide the risks surrounding some countries, mostly where Spanish companies hold important direct investment positions.
The clearest example is Brazil, the LatAm economy with higher growth slowdowns (from 4.5% of 2003-2011 to 1.6% in 2012-2013) together with Venezuela and Argentina. The World Bank downgraded its growth prospects for the country to 1.5% in 2014.
The increase in households’ indebtedness, the minimum unemployment rate (4%) and a less favorable demography are complicating the boost of private consumption. The excessive dependence on this GDP item (more than 60%) urges to reinforce exports and investment to foster economic advances. Just the first ones mean 12% of GDP and have hardly grown lately (above all if oil and basic manufacturing are excluded), which demonstrates negative effects of competitiveness loss recently suffered by Brazil’s economy.