What will 2017 bring to our economy?
What will 2017 bring to our economy?
After a somewhat “depressing” 2016, the beginning of 2017 has started of quite eventful as well. With Trump’s inauguration, the ongoing crisis in the Middle East and the continuing Brexit discussion, the prospects for 2017 are quite uncertain. We will try to put forward a few predictions concerning the economic and financial world that we expect might happen in the coming year.
Considering all the (unfortunate) surprises that have already happened in the first month of this year, it is quite difficult for experts to rightfully predict anything concrete. However, looking at data and historical events there are a lot of professionals who have done a courageous attempt. We have summarized a few notable insights in the future of our economy.
The American investment bank Morgan Stanley for example has predicted something quite unexpected. They stated that Trump’s policies will cause for import growth to increase and export growth to decrease, which is the complete opposite of what Trump has claimed that he wants in his campaign.
In this statement they have assumed that Trump’s threats are largely overdone and that he probably will not raise tariffs. Their theory is based on the fact that the pace of American spending and investment will almost certainly fasten, which will lead to more imports. They also predict a rise in the trade-weighted dollar that will decrease exports. These two together will cause for a different balance in import-export than Trump would like to see happen.
On the other side of the pond, in Europe, multiple political challenges will cause for possible lower consumer confidence and less economic growth in the next year. With elections in the Netherlands, Germany and France and the uncertain consequences of the Brexit, the economy could be facing great problems in Europe due to instability in a few of the biggest powers of the continent.
For now, the consequences of Brexit are quite minimal. However, whether or not this remains this way depends on how the negotiations between the United Kingdom and the European Union will go, mostly concerning Article 50, the article that sets out how an union may leave the European Union. In the worst case scenario, the UK will not be able to come to any compromises with the EU, which will shield off the British market for the remainders in the EU.
The following video will shortly explain the possible consequences that Brexit will bring to the British population and other Europeans.
The chairman of the KPMG, one of the world’s biggest accounting firms, has warned that there is a threat to the stability in Europe bigger than the Brexit: the rise of populism. With multiple elections in the biggest nations in Europe there will be a lot of political instability in the following months, that could lead to protests across the continent.
With the polls suggesting that the PVV will win most seats in the parliamentary elections and the far-right party gaining more support in Germany. People are not content with the way it is, and automatically tend towards populist leaders. Marine Le Pen of France’s National Front Party even named 2017 “the year of the Continental peoples rising up”.
With many Europeans taking it to the street to show support for the Americans in their “struggle” with their new president, the growing uncertainties and discontent may lead to more protests and chaos in Europe, which may greatly harm the economic continuity of the continent.
The World Bank has predicted a global economic growth of 2.7%, which is 0,4% higher than it was last year. The Bank says this small growth is mainly caused by improvements in emerging markets and in developing economies.
On the one side, the dollar is strengthening and interest rates in the US are rising, leading to a tightening of the financial conditions for developing countries and emerging markets. However, on the other side the prices for oil and metals, which are export products in most developing countries, have been seen to be higher than last year.
Between January and September of last year the commodity prices grew more than 40% and this trend is predicted to remain steady in 2017. With the US wanting to invest more in infrastructure worked as a stimulant to the commodity markets.
To conclude our predictions, you could say that 2017 will be a year full of political instability which may in its place cause for economic uncertainty as well. Politics, and more importantly who makes the decisions in a country, will play a big role in the fluctuations in customer confidence and where nations spend their money on.
We are excited to see what 2017 has to bring to the economy, and you?