An unbalanced and weak recovery

The global economy is likely to grow at only a moderate pace this year and the divergences between regions are set to widen further. The US should resume its steady recovery but there is little evidence of a sustained upturn in growth in the euro-zone or Japan, and the major emerging economies have slowed. While there could be an upside surprise from the US, we think the downside risks from elsewhere are greater. In particular, the euro-zone crisis could flare up again, Japan’s modest recovery could go into reverse or there may be a steeper downturn in emerging economies. Prospects for 2014 at least appear marginally brighter.