For years, we have not had to see economic fluctuations as in 2018, which has led to a welter of complicated issues for the global economy on more than one level and in multiple areas. This will cast a shadow over 2019, especially as the US President Trump has made some radical changes in US economic policy in the first-half of his term and which have managed to got on the nerves of most of the world, including traditional allies.
Take the oil sector, given its economic importance. Oil prices took a nosedive by the end of last year after a steady period of increases, whereby the price of an barrel fell more than 40 per cent and setting off a state of instability as the drop may continue into this year.
What is heartening is the constant and effective coordination between Opec and Russia, which is the safety valve for maintaining oil prices at acceptable levels of above $50 a barrel for producing countries. This despite the fact that they will remain fluctuating between $50-$70 a barrel due to many economic and geopolitical factors.
The stock markets are expected to deteriorate amid the uncertainty surrounding the real estate sector and over technology as well after a series of scandals and cyber hacking. Currency exchange rates will also experience further ups and downs.
It goes without saying that the expectations of a possible slowdown in global growth as well as chronic market speculations will also affect prices. In addition, there is another factor that will affect economies. The US-China trade war is expected to worsen further, despite successive concessions by China to avoid such a strife, the latest of which was a reduction in tariffs on US car imports from 40 per cent to 25.
Trump, however, will continue to exert more pressure on Beijing for a comprehensive settlement and on his terms, as he did with Canada and Mexico. It will be difficult do so with Beijing thanks to China’s economic and strategic weightage as a superpower. This means a trade war between the two sides is likely to exacerbate and with negative repercussions on the global economy.
Pressure on some of the world’s major economic sectors will increase, particularly financial and real estate. For the financial sector, the snowballing effect of unpaid loans will get many countries, including developed ones, into a major crisis. Brexit will also lead to financial instability across Europe and prompt financial institutions to move out from the capital of finance London to other European cities, such as Frankfurt and Paris.
What is heartening is the constant and effective coordination between Opec and Russia, which is the safety valve for maintaining oil prices at acceptable levels of above $50 a barrel for producing countries.
The stock markets are expected to deteriorate amid the uncertainty surrounding the real estate sector and over technology as well after a series of scandals and cyber hacking. Currency exchange rates will also experience further ups and downs and be influenced by several factors, including the mechanism of implementing a Brexit agreement between Britain and the EU.
Such an important development will result in implications on both the euro and the pound. As for the dollar, it will suffer due to the huge disparity between Trump’s economic policy and that of the Federal Reserve, which will either lead to more damages for the currency or result in the sacking of head of the Federal Reserve.
In both cases, the exchange rates against the dollar will deteriorate. Do the above mentioned developments foreshadow a new financial crisis, one that is already becoming the talk of the town and expected to occur either this current year or perhaps at the beginning of next.
Everything will depend on how the world addresses the interlocking issues mentioned above, besides the geopolitical aspects that will become increasingly complicated. All of these will place further uncertainty on the economic and financial universe.
But I will take this opportunity to wish all readers a happy and prosperous New Year ...
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.