BNY Mellon chief economist Richard Hoey says the economic decline in Europe has “ended” and expects that the region can now return to a slow pace of expansion.
The BNY Mellon economic update for August 2013 highlights the positive change in the European economy and the potential impact for the global economy, in particular the UK.
Hoey argues that after suffering a double-dip recession caused by “financial stresses on the peripheral countries of Europe”, the European economy has hit bottom and can now return to growth.
He says: “We believe that the economic decline in Europe overall has ended.
“Europe is basically at the bottom and about to begin a positive expansion in Europe, but the pace of expansion is likely to be very slow because Europe continues to have a number of policy issues.”
Noting the recent positive economic data also coming from the UK, Hoey argues that the change in the European recovery, although minimal, can have a positive impact on both the UK and the global economies.
He says: “The transition from declining economic activity to a slightly positive economic activity in Europe is a positive for the world economy.
“In the UK the numbers have picked up a bit recently and so I think their economy is doing a bit better. It certainly will be helped as the European recession ends, even if the European recovery is weak.”
Overall, Hoey expects “sustained global economic expansion”, with growth in both developed and emerging countries, although developed countries will see better growth in the near term.
He says: “From a longer-term perspective, emerging countries have a higher trend growth rate than developed countries, due to continued diffusion of modern technologies and the long-term uptrend in the productivity of their labour force.
“Cyclically, however, the countries with the best prospects for a near-term improvement in economic growth are the developed countries, as they recover from depressed levels of economic activity in response to easy monetary policy.”
The recent slowing in emerging market growth will also be helped by the improvements in developed economies, argues Hoey. He says: “Improved economic activity in the developed economies should help stabilise the emerging country economic growth rates.”
Emerging market economies can also expect “sustained expansion”, according to Hoey. However he adds that this growth will occur “at a somewhat decelerated pace”.