The US dollar has peaked and EM inflation is at a 15-year low, which shows that EMs are in a better shape, says Morgan Stanley's Chetan Ahya.
Chetan Ahya, chief economist and global head of economics at Morgan Stanley, in an interview with CNBC-TV18 shared his views on how the Indian and global economy may shape up in 2019.
"Global growth will moderate and would trend around 3.5 percent for most quarters in 2019," said Ahya on January 3.
“The bigger story that we have for 2019 outlook is we think the mix in growth will change – developed markets will slow but emerging markets will stabilise. So EMs will take the lead in terms of driving global growth in 2019,” he said.
According to Ahya, "The US growth is expected to slowdown meaningfully to 2.3 percent average in 2019 from current run rate for the fourth quarter, which is around 3.6 percent and therefore the Federal Reserve is expected to pause in the middle of this year".
"However, the market is focused on bigger issue that is the Fed balance sheet and awaiting the commentary on US Fed’s stance on balance sheet," said Ahya.
Ahya is of the view that the US dollar has peaked and EM inflation is at a 15-year low, which shows that EMs are in a better shape.
“We think both in combination where US is expected to slow, the Fed is expected to pause and the fact that EMs are doing okay, the dollar will continue to weaken against the broader EM space.”
Talking about growth in India, he said,"It is in a different cycle in some ways compared to China because the structural story is intact but had some deep cyclical problems. The underlying fundamentals in terms of policy mix i.e what is the real rate levels and what is the direction of broader fiscal policy has been quite supportive".
“India is all set to see that gradual improvement in growth and the numbers are pointing in that direction except for the auto data we expect to have had some impact because of NBFCs problem and the real estate sector. The broader economy seems to be doing well,” he said, adding that the average GDP growth for India is expected to be around 7.6 percent in 2019.
"The most important issue that foreign investors are looking at is the monetary policy framework management and if there is any alteration to that then that could raise concerns," said Ahya.Source: CNBC-TV18Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.