Global growth questioned, Eurozone recovers

While a positive international economic development is questioned by more executives, consultants see positive impacts on the Eurozone’s economics development. Results from McKinsey and E&Y survey and studies.

More executives than at any time during this year are concerned about the economic conditions in their home countries and around the globe, says a latest McKinsey survey. Key concerns include increasing volatility of economic conditions and exchange rates. They are seen as emerging threads for domestic and global short-term growth. 

Volatility is cited more often in McKinsey’s September study than in any previous ones. For domestic growth, volatile exchange rates are a major thread to growth, especially to managers in emerging markets. 44 percent state increased economic volatility as a thread to the growth within the next twelve months. 46 percent of emerging market executives state geopolitical instability as a thread. During the last three months, the number of executes seeing this as a thread decreased. 

Many executives believe the oil prices to remain low and fuel growth. Executives expect the US-Dollar to outperform other currencies in the next six months. Three quarters of Chinese executives and executives from Latin America expect their currencies to depreciate against the Dollar. 64 percent of respondents in the United States expect the Dollar to grow in value against the Euro. Only one third of Eurozone respondents say the same.

According to Ernst and Young, the Eurozone remains a “sweet spot” that benefits from lower energy prices, more competitive exchange rates and a solid demand in the UK and the US. Consumer demand remains a key driver for recovery in the second half of 2015. E&Y expects consumer spending to growth by 1.7 percent in 2015 although growth will slow down when energy prices recover. Export growth of 4.8 percent year will also increase the Eurozone’s growth. 

With the recovery of the Eurozone, some work to closing budget deficits will be done through higher tax revenues. Still, government spending will remain constraints for some time and a growth of 1 present for the years 2015 to 2019 in public spending is expected. Although systematic risks are generally seen fading away by E&Y, the remaining legacy of debt will slow growth down.