In 2015 developed countries' economic growth could recover to the level of their potential. The growth rate of the US could even surpass its potential, supported by a healthy household balance sheet, a tighter labor market, and the rise in capacity utilization. As for the Eurozone, although uncertainties associated with the Ukraine/Russian crisis would linger, the depreciation of the euro and the significant drop in oil prices will likely prove supportive of its economic recovery next year. In Japan, the postponement of the second hike in consumption tax to April 2017 and the radical quantitative easing measures will probably improve its growth outlook beyond expectations in 2015.

Emerging market economies will likely face greater uncertainties in 2015, and their performances will also likely diverge. Countries such as Russia and Brazil will face greater difficulties because of geopolitical factors and the decline in commodity prices. Some countries may experience significant capital outflows due on the US rate hikes and speculative attacks from global investors. On the other hand, some Asian emerging economies will likely benefit from the recovery of the developed economies, especially the US. Turkey may become one of the beneficiaries from the sharp decline in oil prices.

The Chinese economy will face upward and downward pressures. A positive factor that should support China's growth in 2015 is the export sector, which will benefit from the recovery of the developed economies. Our latest forecast shows that China's merchandize export growth may accelerate to around 7 percent in 2015, up by about one percentage point from 2014. On the other hand, real investment deceleration may become an important drag to economic growth in 2015, as property sales (measured in floor space sold for commodity housing) declined by 7.8 percent between January and October this year. Historical data shows that property investment is largely determined by property sales in the previous quarters. Our basecase forecast for China's real GDP growth is that it may decelerate to 7.1 percent in 2015 from around 7.4 percent in 2014.