"The new year promises to be a better year," writes PIMCO's Saumil Parikh.
"Many of the challenges faced during 2013 have either progressed toward a point of self-exhaustion or are being overcome via alternatives to yield a brighter outlook for global growth in 2014," he added. "PIMCO expects the global economy to grow between 2.5%-3% next year."
Here are PIMCO's expectations for the world's four biggest economies:
- US: "In the United States, the abatement of fiscal policy tightening combined with steady improvements in labor market demand and higher asset valuations is likely to drive real economic growth from its current 1.8% rate toward 2.25%-2.75% next year. Included in this view are a continued improvement in demand for housing and consumer durables, somewhat faster household income growth and a small acceleration in non-residential investment growth on the back of extraordinarily easy financial conditions that benefit corporations."
- Eurozone: "Expect the eurozone to finally emerge from recession in 2014. With monetary policy clipping the nasty left tail of a sudden stop in eurozone growth, and fiscal policy transitioning from tight to broadly neutral, select steady improvements in competitiveness should see the private economy grow going forward, albeit very slowly. We expect eurozone growth of about 0.25%-0.75% next year."
- Japan: "Japan is likely to continue to grow in 2014 with the continued assistance of extraordinarily expansive policies. The lagged positive effects of easy monetary policy will be felt in steady consumption, higher investment and better net trade contributions. But, tighter fiscal policy via higher consumption tax rates will likely cap the growth trajectory somewhat as Japan looks to find ways to transition to a self-sustained growth path in the year ahead. Expect Japan to grow between 1%-1.5% next year."
- China: "In China, external demand will likely improve in 2014 as the U.S. and eurozone economies grow faster. Domestic demand will likely slow somewhat as a clampdown on extraneous investment feeds through the economy and the central government's focus shifts away from "growth at any cost." China, from an external perspective, promises to look and feel like a different economy in the year(s) ahead. Greater focus on China's household demand and less focus on its industrial demand will change China's impact on the global economy slowly but surely. We expect about 7% growth in China next year."
Head to PIMCO.com for the full note.