“What we are seeing is that after a period of very slow growth in industrialized economies and very strong growth in emerging markets, we are seeing a shift back to industrialized economies and in particular, the United States,” he said.
In Europe, De Groot said the economic storm has subsidized but the economies in Europe are undergoing a very slow recovery process. “Reforms are paying off, but private sector rebalancing has only just started,” he said.
The German economy is the strongest in Europe for the near future, he said.
In the U.S., De Groot said population and productivity trends favor the U.S. For the next 10 to 20 years, population growth in the U.S. is stronger than in China, the United Kingdom, Japan and Europe.
The shale gas/oil revolution has put the U.S. in a lower cost position for energy than Europe; De Groot said there is a 150% price difference between the U.S. and European natural gas. “That’s a very positive development for manufacturing in the U.S.,” he said.
While high labor productivity, a housing market recovery, the shale gas boom and lower consumer debt favor economic growth in the U.S., De Groot said temporary headwinds to the U.S. economy are uncertain political dynamics of domestic fiscal policy, the debt ceiling debate, and the uncertain global economy. The U.S. must deal with controlling its debt, he said.
“Kicking the can down the road is not a long-term solution,’ he said. “As long as they keep doing that, there is pent up investment demand that will not be released.”
De Groot said there is much speculation about Federal Reserve monetary policy. Signs seem to point to an “easy” monetary policy and flat or fading interest rates until March 2014.
Long-term rates will resume their upward trend by 2014, he said, pulling global interest rates higher.
While China faces a challenge in creating sustainable growth, De Groot said he is optimist the country’s leaders can help stem the rise in debt and build up domestic demand.
“New Chinese leadership knows they need more sustainable growth, and they are making the shift from export-led economy to consumption led economy,” he said. De Groot said the Chinese economy may grow at a rate of about 6% to 6.5% in the years ahead.
Mexico’s economy, while struggling in the short term, should gain from its low unit labor costs compared with China. “Longer term, we are quite bullish on Mexico,” De Groot said.