Private sector still deleveraging, economic growth remains weak: Peter Elston, Aberdeen Asset Management Asia

In a chat with ET Now, Peter Elston, Head of Asia Pacific Strategy & Asset Allocation, Aberdeen Asset Management Asia, talks about the global economic scenario. Excerpts:

ET Now: How do you think the near term looks in terms of risk appetite and how much more to go on the way down before we can see some stability?

Peter Elston: I have been fairly sceptical about the economic recovery that people were talking about in the first quarter. Indeed since 2008-09 and since the depths of the crisis, the recovery that we have had has been driven by massive fiscal and monetary stimulus which cannot be sustained. If we strip that out, economic growth and private sector demand has been pretty weak.

One by one, governments are being forced to rein in fiscal stimulus and fiscal discipline is being forced upon them. As that happens, it is becoming apparent how weak the underlying private demand is. At the same time, we have an impact on private sector confidence which is contrary to the source of response that governments and central banks were hoping for. Paradoxically, in some ways, the more governments and central banks stimulate, the less inclined individuals and companies are to spend or invest. This is because they have realised that financial markets economies are being manipulated.

That makes them less, rather than more, confident in the future. We are seeing economic contraction and a loss of confidence in Europe which relates to problems in peripheral countries. Across the globe, we have a lack of demand, confidence and private sector confidence because at the end of the day, the private sector is still deleveraging and that means growth remains very weak.