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The structural shift in economic gravity from the US, Europe and Japan (G3) to the East is picking up and accelerating, said David Carbon, Chief Economist, DBS Bank.
“This is speeding up, not slowing down. Don’t blink. Don’t miss it,” Carbon said at the sixth edition of the ‘Asian Insights Conference’, organised by DBS Bank here.
This structural shift in economic gravity from the West to the East is the biggest change in global economy now, he added.
Carbon said that one needs to get used to even slower global economic growth in the coming years.
“If you are worried about slowing global growth, get used to it. The global growth is not going to go back up,” he said.
He also noted that one cannot expect urgent policy actions — by developed world monetary authorities — such as quantitative easing, negative interest rates to lift global growth in the coming days.
However, Carbon said that slow growth is not necessarily bad. “If growth is slowing because incomes are going up — which is what is happening in Asia, it is not bad. It’s good thing. Growth slows when things are going right. Growth is slowing in Asia because things are going right in Asia,” Carbon later told BusinessLine.
However, in the case of G3, there is slowdown in population growth, which is affecting working age population growth and thereby overall economic growth.
Carbon saw India, Indonesia and the Philippines as modest exceptions to the downward expectation on global slowdown.
“These three countries — India, Indonesia and the Philippines are seeing rise in population. To that extent, they will get reprieve from this pressure,” he added. .
US Fed move Later, speaking to Businessline on the sidelines of conference, Carbon said that US Federal Reserve is behind the curve and the markets are way too pessimistic about possibility of interest rate hike.
“I think September is real possibility for Fed rate hike. I certainly expect one by December.”
There is a real risk here that markets are not paying attention on how much the Fed would have to hike over the next 24 months, Carbon said.
“Overall, consumption, inflation and job growth in the US points out to lot more Fed rate hikes over next 12 months than what markets are factoring in.”
(this writer is in Singapore at the invitation of DBS Bank)
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