Europe is the major driver of the strong recovery in advanced economies. Out of seventeen Euro Area countries In 2014 (excluding Latvia which joined the Euro Area on 1 January 2014), Cyprus is the only one expected to have negative growth this year, while in 2012 and 2013 the number of countries that experienced economic declines were ten and nine respectively. Although the upgraded projection for output is encouraging, the low inflation within the Euro Area could be a ticking bomb in Europe. Inflation in the Euro Area has been decreasing since 2011 from 2.7% to 0.92% according to the forecast for 2014, which substantially deviates from the 2% inflation objective of the European Central Bank over the medium term. There are concerns that low inflation may develop into deflation, especially for countries with high unemployment such as Greece, Spain and Cyprus. There are signals emitted by the ECB that a quantitative easing programme is a possible means for the Eurozone to fight off the deflation threats it is currently facing. However, whether the programme would be actually implemented is still questionable.

In developing Asia, growth remains robust despite the widely feared spill-over effect of the US tapering. The ASEAN-5 region, consisting of Indonesia, Malaysia, the Philippines, Thailand and Vietnam, is expected to grow at a rate between 4.95% and 5.62% per year from 2014 to 2019. The expected growth of Thailand in 2014, the lowest among the ASEAN-5 countries, drops to 2.50% compared to 2.87% in 2013, due to the political unrest there. Growth in the Philippines and Indonesia is also projected to slow down, from 7.16% to 6.47% and from 5.78% to 5.36% respectively. In spite of the somewhat pessimistic forecasts in these three countries, overall ASEAN-5 is predicted to grow at a faster pace of 5.60% in 2014, compared to 5.42% in the previous year.

Other than the risks mentioned in the advanced economies and the emerging markets, several geopolitical risks add uncertainty to the global economic environment. The conflict between Ukraine and Russia could escalate with the recent intervention by the United States, and the exchange of artillery fire between North and South Korea in March heightened tensions on the Korean peninsula. Undoubtedly, there are signs that the global economy has strengthened and the trend is expected to persist, but market investors still need to keep a close eye on these potential threats.