The global economy in 2018. Records and visovivat and has come in retrospect to look at the main economical events of the end of dollar hegemony. Trade war
The United States and China accelerated the process of de-dollarization, the formation of currency areas. The point of no return has already been passed…
Records and challenges: how has the global economy in 2018
The Author – Vladimir Agoev, Michael Kalmatsky
For the global economy, the outgoing year was a real test of endurance. Over the past 12 months the world is faced with trade wars, collapses in the stock, foreign exchange and digital markets, rising anti-European sentiment in the EU, and record spikes in oil prices. There is an unexpected change: the warming of relations between the US and the DPRK, as well as a massive u-turn of many countries towards abandoning the dollar. The most important events in world economy in 2018 at RT.
For the global economy in 2018 remembered new records and major challenges. The growth of global GDP remained close to last year’s values, but some experts predicted risks are ultimately realized .
In the beginning of the year in the world there has been a significant decline in geopolitical tensions that has benefited the global economy and financial markets, recalled in an interview with RT, the General Director of analytical Department of Alpari Research & Analysis in the UK, Roberto d’ambrosio. Foremost expert indicates warming relations between the DPRK and the U.S. and South Korea.
However, according to Roberto d’ambrosio, increasing trade protectionism, the outflow of capital from emerging markets, strengthening the position of eurosceptics in the EU has caused serious concern in the expert community about the slowdown of global GDP growth.
Battle of the rates
The greatest influence on the development of the world economy in 2018, provided by the United States trade war with China. According to experts, tariff confrontation between the two countries in particular had a negative impact on the level of global demand.
In the early years, the US has accused China of illegally obtaining U.S. technology and intellectual property. According to the White house, the result of actions China has become a huge trade deficit with the Asian States Republic with a volume of $375 billion.
In may, the countries agreed on the peaceful settlement of the conflict, but the American side has decided to unleash a full-scale trade war and imposed duties amounting to 25% and 10%, half of Chinese exports ($250 billion). In response, Beijing introduced the tariffs (from 5% to 10%) on imports of American goods at $60 billion, after which Washington has threatened to impose duties on all shipments from the Asian Republic.
It is noteworthy that in November the two largest economies of the world, we have exchanged criticism of each other at the APEC summit. As a result, the participants of the forum for the first time failed to sign a final Declaration. At the same time in early December at the G20 summit in Argentina Washington and Beijing unexpectedly for observers, agreed to the truce — the United States has promised not to raise duties on 1 January 2019. The parties agreed 90 days to conclude the bargain.
However, according to experts, overdue thaw in relations between the two countries could be disrupted by the arrest in Canada financial Director of Huawei at the request of U.S. authorities. Analyst CC “Finam” Sergey Drozdov considers that the markets regarded this action as a tool of blackmail in the trade negotiations, the U.S. and China.
However, the majority of RT experts expect to resolve the trade conflict. So, simultaneously with the expected decline in GDP growth of China economists point to the recession in the American economy as a result of the tariff conflict.
“The fact of the return of countries to discuss the compromise is a prerequisite for peaceful dispute settlement and a positive signal for the global economy. Note that in recent statements trump has actively encouraged the fed to ease monetary policy in 2019 to support economic growth in the US. In these comments, the head of the White house for the first time recognizes the destructive impact of the trade conflict to the state’s economy,” said chief analyst “BCS Premier” Anton Pokatovich.
Additional pressure on the global economy have had, and monetary policy of the Federal reserve system of the United States. The U.S. regulator four times raised its bid in 2018 — to 2.25—2.5% per annum. The fed caused a rise in yield of US bonds and provoked capital outflows from emerging markets.
Sergey Drozdov stressed that most at risk was the economy of Turkey, Argentina and South Africa. With the beginning of the year the Turkish Lira fell against the dollar by almost 40%, the Argentine peso collapsed by 105%, the South African Rand has weakened by 15%. A key indicator of the stock markets of developing countries MSCI Emerging Markets index over the last 12 months has decreased by almost 20%.
Interestingly, fed policy and rising geopolitical risks had a negative influence on the stock market of the United States. Investors withdrawal from the stock of American companies to protect their money, invest it in Treasury bonds United States Treasury.
The fears of players on the geopolitical threats have waned in the summer, after the thaw in relations between the States and the DPRK. But against the backdrop of fed tightening and strengthening of disputes between Washington and Beijing continued sales of the shares. According to Roberto d’ambrosio, heaviest during 2018 affected securities of us companies in the technology sector. The biggest blow came on Facebook, Amazon, Apple, Netflix, Google. In early December, high-tech NASDAQ index slumped to the lowest since November 2017.
The oil excitement
For the world oil market 2018 was a period of new price records, but it was difficult. In September, the price of energy commodities Brent for the first time in the last four years exceeded $87 per barrel.
“And in 2017, a significant impact on oil prices had an agreement to freeze production OPEC+. In our view, maintaining a balance in the market 90% is a credit to the exporters, to carry out the terms of the contract in the course of the year,” said Anton Pokatovich.
We will remind, in the end of 2016, OPEC countries and 11 countries outside of the cartel (including Russia) agreed to cut oil production to 1.8 million barrels per day to align supply and demand in the world market of raw materials. In June 2018 balance has been achieved, and to maintain the participants decided to increase the production of hydrocarbons by 1 million barrels a day.
Neftekachalki approved the resumption of production to mitigate the risk of a sharp rise in oil prices. In addition, exporters wanted to protect the world market against potential supply disruptions of energy resources of some States. We are talking about the fall of oil production in Venezuela and Mexico, as well as the reduction of exports from Iran amid U.S. sanctions.
By the fall of raw energy beginning is steadily falling because of increased production of oil in Saudi Arabia, Russia and some countries of the agreement on OPEC+. From October to December, Brent quotes fell by almost 35% — to $56 per barrel. Against this background exporting countries again talking about reducing production.
The participants of the transaction it was not easy to decide on a new freezing production. Sanctions pressure of the United States does not allow Iran to reduce oil production, while in Russia this process is difficult in the cold season. In the result of fierce disputes between the two countries, the negotiations lasted for two days. In the end, Moscow was allowed to gradually cut production and Iran and is made an exception.
Under the agreement, the state will reduce daily production in the first half of 2019 at 1.2 million barrels.
However, OPEC’s decision+ not yet stopped the fall in oil prices since the beginning of December, the quotes of Brent fell by almost 15% and for the first time since October of 2017 began to drop below $54 per barrel. However, experts do not exclude that the agreement of OPEC+ can provoke growth of quotations in the range of $65-70 per barrel in the new year.
In the past year de-dollarization has become one of the most discussed topics among the heads of state and business representatives around the world. On the background of the world economy from the us currency, many countries did not rule out in the future, phasing out dollar-denominated transactions and transition to settlements in national currencies with their partners.
First in 2018 on the path of de-dollarization were China (with the launch of oil futures in yuan) and some EU countries (while the nominal desire to trade with Iran in euros to avoid us sanctions). Limitations of Washington for the Iranian power industry and the threat to turn off Tehran from the payment system SWIFT can seriously damage European business in the Islamic Republic. For this reason, the EU has begun to develop its own mechanism calculations.
“In theory, the transition to calculations based on the Euro, possible and technically not so complicated, but such changes can’t happen overnight. Such a transformation will hit the most main pillar of US dominance over the rest of the world. Therefore the us will do everything possible to defend the global supremacy of the dollar”, — said Roberto d’ambrosio.
To significant developments in the world economy over the past 12 months, the experts attribute the large-scale collapse of the cryptocurrency market. The end of 2017, the world will remember the incredible hype around digital money. Bitcoin is among the five major currencies in the world, and its price exceeded $20 thousand even then against the background of rapid appreciation of electronic coins, many economists began to warn seriously about the threat of another financial bubble.
Fears of experts confirmed in January 2018. Cryptocurrency market collapsed, and any attempt quotes to return to the previous records ended in even greater decline. To reduce the cost of electronic coins contributed to the strengthening of global regulation of the industry, regular hacker attacks on the crypto currency exchange, prohibition of advertising of digital money known Internet companies, as well as the withdrawal of major investors into real money.
“All attempts of growth were associated with private occasions — hardforce (technological splits cryptocurrency), renewal, expansion, purchase, enter into cooperation agreements. There was no powerful events to reverse the General downtrend. Any market leads psychology, and cryptocurrency this is doubly true,” — said in an interview with RT’s senior analyst BestChange.ru Nikita Zubarev.
Today bitcoin is trading near the mark of $3.8 million, but experts in their forecasts are in no hurry “to bury” cryptocurrency. As explained in an interview with RT, the President’s adviser of the legal service of the European digital markets Mr ANNIKOV, after the departure of investors, enthusiasts and speculators from the market of the cryptocurrency industry is increasingly interested in professional participants and large financial institutions.
Crack in the Union
In 2018, the EU authorities together with the International monetary Fund (IMF) announced the completion of a multi-year crisis in Greece. It is curious that neighboring Bulgaria — the fastest growing economy in the region after the sharp acceleration of inflation have lost the ability to quick entry into the Eurozone. High levels of poverty and corruption, the decline of foreign investment and the need to reduce social spending has forced the country to refuse from participation in the contest “Eurovision-2019”.
The experts noted also a marked growth in anti-European sentiment in some EU member States. First of all we are talking about Italy. The leadership of the country went against the guidance of the European Commission (EC) has approved raising the budget deficit to 2.4% in 2019. According to the EC, a significant difference between the income and expenditure of the Italian Treasury contributes to the growth of a huge state debt of the country and casts doubt on its financial stability.
A similar situation was observed in Spain. Madrid also refused to follow the strict requirements of the EU — instead of cutting the budget deficit and public debt, Prime Minister Pedro Sanchez approved the increase in social expenditures.
Interestingly, the path of resistance to the EC rules is going to go and France — the second economy of Europe. In the hope to stop the mass protests and popular discontent with the reforms of Paris intends to raise salaries, to relax the tax burden and thereby increase the cost the state Treasury almost €10 billion In France risks again raise the budget deficit above the 3% limit and increase the burden on the national debt amount to nearly 100% of GDP.
Simultaneously with the growth of anti-European sentiment, the EU has started to fix the slowdown in the economy of the region. According to Eurostat, in the third quarter of 2018, the GDP of the EU grew by only 0.3% is lowest since mid-2016. The most serious negative factor Sergey Drozdov considers economic deceleration in Germany. From July to September gross domestic product increased by 1.1%, while in 2017 the corresponding value was 2.6%.
The point of no return
In its latest report, the IMF downgraded its forecast for growth in global GDP from 3.9% to 3.7% in 2018 and 2019. According to Sergei Drozdov, today, the global economy came close to the peak of the next economic cycle, following which the possibility of a new period of slowdown.
The world FACES a new FINANCIAL global crisis!
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