Economist sees world economy strengthening in 2014

Global economy is likely to gain momentum in 2014 as headwinds abate, though the pictures may vary in different countries, said a leading economist on Thursday. "The (world) recovery is strengthening," Olivier Blanchard, chief economist at the International Monetary Fund, told a meeting of the Council on Foreign Relations, a New York-based think tank. He said that the world economy is forecast to grow 3.7 percent in 2014, up from 3 percent in 2013. "The basic reason behind the stronger recovery is that the brakes to the recovery are progressively being loosened," said Blanchard. "The drag from fiscal consolidation is diminishing. The financial system is slowly healing. Uncertainty is decreasing." Blanchard also attributed the upside momentum in large part to the ultra-loose monetary policies taken by major central banks around the world in the aftermath of the global financial crisis. However, economic pickup is not equally spread, said the economist. "Not all countries are recovering in the same pace." The U.S economy is accelerating, he said. Blanchard referred to several reasons for his optimism on the world's largest economy: a diminishing restraint on fiscal problems, a good shape in banking system and robust consumer spending. The U.S. economy is expected to grow 2.8 percent in 2014, compared with 1.9 percent in 2013, according to IMF estimates. He also expressed confidence in the economy of Britain, Germany and France. As for Japan, he noted that the country's recovery is on a solid base, with its growth anticipated to be at 1.7 percent in 2014. But he cautioned that the Asian country should focus on consumption and investment to keep growth sustainable, rather than relying on government spending and exports. Commenting on southern Europe, he said it is still a place "with a good reason to worry" as internal demand in the region is still weak in some cases, although competitiveness is improving against the backdrop of a better external environment. With respect to emerging markets, Blanchard felt optimistic in general, but stressed that the U.S. Federal Reserve's tapering process as well as speculations over an interest rate hike in the country may pose a major risk in capital flight from emerging markets. He predicted that China's growth rate will be 7.5 percent in 2014, down slightly from 7.7 percent in 2013. Blanchard believed that a main challenge facing the world's second largest economy is its need to strike a balance between controlling credit growth and bolstering economic growth. Blanchard expected China's economic growth rate to be at 6 percent to 7 percent annually on average in the next decade. In a recent market forecast meeting of U.S. financial institutions, economists believed that China would maintain steady economic growth in 2014 on the back of its ongoing reforms. "We heard of 'hard landing' of China every year, but it doesn't come, partly as the government acts aggressively against it," said Ethan Harris, co-head of global economics research of Bank of America Merrill Lynch. Credit rating agency Moody's forecast that China's growth in 2014 will remain close to the 2013 level -- 7.7 percent. While Justin Yifu Lin, former chief economist and senior vice president of the World Bank, was more optimistic about China's economic prospect. China not only would maintain an average annual growth rate of 7.5 to 8 percent in the coming few years, but also has the potential to keep the rate at around 7 to 8 percent in the following 15 years, he told a forum in New York earlier this month. Lin cited huge investment potential in industry upgrading, technology innovation, environmental improvement and an anticipated improvement in labor productivity.