Concerns about the vulnerability of some emerging economies and gyrations in financial markets over the past few days should not dent "cautious optimism" about the global economy this year, leading central bankers and officials said on Saturday. In the big closing session of the World Economic Forum in Davos, they recognised risks existed and badly run emerging markets might be vulnerable to shocks, but concluded that the outlook was brighter than it has been for many years.
Haruhiko Kuroday, the Japanese central bank governor said: "I think we can be cautiously optimistic about the global outlook. "The US economy is likely to grow by 3 per cent plus this year as well as next year. "Europe is finally recovering. Japan is also making significant progress. And emerging economies like India, China as well as Indonesia and others, their economic growth rates is likely to be maintained at high levels or likely to accelerate," he said. Larry Fink, chief executive of BlackRock struck a note of more caution about market movements. "The experience of the market place of this past week will be indicative of this entire year; I think we are going to be in a world of much greater volatility. That doesn’t mean we end up in a bad place . . . but there will be quite a bit of disruption". The disruption Mr Fink talked about came, he said from an expectation in markets of always rising equity prices and the ease with which badly-run emerging economies could blame the Federal Reserve’s tapering of monetary policy on a natural desire of capital to move away. Montek Singh Ahluwalia, the deputy chairman of India’s planning commission, said that India did not fear a Fed taper despite the difficulties cause last year. He said India was now in a much better place to withstand any withdrawal of US monetary stimulus. "I feel that while interconnection is there, well managed economies will be able to withstand the shock". Christine Lagarde, managing director of the International Monetary Fund, said apart from the recovery she expected this year, she was concerned about two other "Rs". The first was "risks" where she thought some old risks such as the need to finalise financial sector reforms were as important as risks over US tapering, and new concerns such as deflation in the eurozone. She also said that in the longer-term the other "R" was "reset", by which she explained that monetary and fiscal policies around the world still had a long way to go before they could be classed as normal. "The final reset is those structural reforms that are necessary in all corners of the world," she added. The consensus of cautiously optimistic sentiment has not been seen at the World Economic Forum since 2007 and it has been shared by policy makers, politicians and business leaders in Davos this week.