Dr Doom lifts mining gloom
Nouriel Roubini is often, somewhat unkindly, referred to as Dr. Doom (or 'Permabear') because of the many pessimistic economic predictions he's made in the past.
But ever since he accurately forecast the 2008 global financial crisis sparked by US sub-prime lending, people have tended to listen to the NYU’s Stern School of Business professor and IMF, World Bank and US Fed economist.
Roubini, who now heads his own global economics consulting business, was in rare uplifting mode this week delivering brighter forecasts for the world economy in 2014.
Growth in developed economies will speed up albeit below capacity and there is even some good news for gold (the dollar printing will continue for a good while longer) in his forecast.
But his bullishness on faster rates of urbanization and industrialization in emerging markets is particularly good news for miners:
Emerging economies will grow faster in 2014 – closer to 5% year on year – for several reasons. Brisker recovery in advanced economies will boost imports from emerging markets. The Fed’s exit from QE will be slow, keeping interest rates low.
Policy reforms in China will attenuate the risk of a hard landing. And, with many emerging markets still urbanizing and industrializing, their rising middle classes will consume more goods and services.
Some of the biggest winners among emerging markets will be in Latin America including Chile, Colombia, Peru, and Mexico, while Roubini also counts a number of Sub-Saharan countries and the Philippines and Malaysia as potential standouts due to "fewer macroeconomic, policy, and financial weaknesses" than their peers.
Roubini picks out among others India, Indonesia, Brazil, South Africa and Argentina as emerging markets that "will remain fragile in 2014, owing to large external and fiscal deficits, slowing growth, below-target inflation, and election-related political tensions."
On China, Roubini is harder to pin down but the country, the driving force behind much of the global metals and minerals trade, is expected to maintain an annual growth rate above 7% in 2014:
"But, despite the reforms set out by the Third Plenum of the Communist Party’s Central Committee, the shift in China’s growth model from fixed investment toward private consumption will occur too slowly.
"Many vested interests, including local governments and state-owned enterprises, are resisting change; a huge volume of private and public debt will go sour; and the country’s leadership is divided on how quickly reforms should be implemented.
So, while China will avoid a hard landing in 2014, its medium-term prospects remain worrisome."