Allianz.com: What kind of growth do you expect to see in 2016 and 2017 and what do you expect to be the main economic drivers?
Heise: I actually expect to see decent growth worldwide, though it will be different from what we saw last year. Growth will be stronger in the industrialized world and weaker in markets that depend on oil or commodity exports. The strong drop in the price of oil will be the main driver. If oil prices remain anywhere between 30 and 50 dollars per barrel, it will boost the consumption in the large majority of countries. That said, the price of oil is pretty difficult to predict.
El-Erian: The world economy will do OK, but it will fall short of a takeoff and of its potential and this despite ample cash on the sideline and exciting innovation. The main culprit is the partial policy response. We have yet to see a shift from our current reliance on central banks to a more comprehensive policy approach. So this policy handoff will be one of the central questions. We will also face higher financial volatility. The central question here is whether the volatility will remain contained to the financial markets or whether it will start affecting economic activity.
It seems that a lot depends on the central banks. Have they been overburdened since the 2008 financial crisis?
El-Erian: We can distinguish three phases here since the eruption of the global financial crisis in 2008. It all started with the “doing whatever it takes” response to the crisis. This prevented a worldwide depression and the breakup of the euro zone. The Federal Reserve Bank (Fed) and the European Central Bank (ECB) entered phase two in 2010 and 2014 respectively, when they took responsibility not only for monetary policy, but for the economy as a whole. Their measures helped generate some growth, but did not unleash new production capacities. Phase three will see pressure on unconventional policies. I would give central banks an A+ for the first phase and a B+ for the second phase. It is still too early to grade phase three.
Heise: As Mohamed says, we have been over-reliant on central banks. We cannot expect higher productivity or growth just by prescribing more of the same monetary medicine.