Last week, the chief of the International Monetary Fund cautioned that the era of low interest rates risks fueling asset bubbles around the world. She meanwhile called for more central bank easing as there is a bigger threat: the prospect of a long period of weak global growth. however, a number of analysts consider that this warning is exaggerated and there are heavy reasons why we should be upbeat about the global economy.
The oil drop is almost universally good news for the global economy
While it has undoubtedly hurt some of the world's prime oil exporters, but most oil producers have the reserves to overcome these setbacks. The ones at an advantage have become oil-importing countries, which include a large number of poorer developing states as well as much of Europe.
The strong dollar has been auspicious for most countries
Dollar strength is normally good for the world economy though it may be hampering US exporters and foreign earnings. Many countries can gear up for higher exports and their companies earn more abroad. Being the world's leading transaction and reserve currency, the greenback can radiate confidence internationally, say a number of analysts. The wise decision was made by the Chinese authorities to let the yuan follow the dollar upward and become, in time, a reserve currency.
The U.S. economy is regaining ground
Many analysts consider that sound fiscal policies and appropriate monetary easing by the Federal Reserve will sooner rather
than later generate a healthy normalization of American interest rates.
The ultra-low rates of the past six years indicate weakness, not strength. Credit tightening, which is widely expected to come this summer, would be a sign the country is getting back on track.
Despite deceleration, emerging market economies keep sustainable growth
Enduring slowdown is likely to put China's economy on a more
sustainable path, driven by domestic consumption rather than by inflated
exports.
India, under new Prime Minister Narendra Modi has rediscovered a more stable growth trajectory, while both Brazil and Russia are getting used to the environment harmful for their economies which can finally spur them to produce new policies.
Nigeria, the leading economy in Africa, has held a general election resulting, for the first time, in a previous leader's ouster — a sign of democratic maturity likely to give an impulse to the economic activity that could echo all over Africa.
Growth in Europe
Europe is still home for many of the world's most technologically adept companies and much R&D brainpower. The European Central Bank's stimulus program launched at the beginning of the year, under which it is buying large quantities of government bonds to stoke up the money supply and fight deflation, is undoubtedly a wise move which is generating asset price bubbles. What is more important is that the QE is contributing to a recovery that was already on track at the turn of the year as a result of healthier bank balance sheets, low interest rates and oil prices.
