2019 promises to be a most interesting year. Below are my predictions for the year ahead. Sadly, I don’t think it will be a peaceful or stable one but the way of the world is constant change. There will be some positive bright spots. Much depends on the calibre of the global leadership.
1. Brexit chaos: May’s deal will prevail- at what cost?
Readers will probably be sick and tired of hearing about Brexit, since it is all that is in the news here in the UK. Whether you voted to leave or to remain, the consensus of the public is that the politicians should just get on with it. Sadly the politicians themselves appear unable to reach agreement on the way forward. As has been said before on this blog, that leaves an alternative between No Deal and Theresa May’s deal. I don’t think the UK will go over a cliff edge that both business and security services have repeatedly warned against. However there is a real possibility of a General Election and a change of government. The next 6 months will require all of May’s political skills. Meanwhile Emmanuel Macron of France will struggle to rein in French public anger over fuel tax increases. Whatever happens, Europe can no longer be called boring.
2. China will face both economic and geopolitical headwinds
The PRC is increasingly in the news for all the wrong reasons these days. The economy is slowing down and the pressure of US President Donald Trump’s trade war is seemingly relentless. It is debateable whether Beijing anticipated such a strategy from the US. To add to the woes China is now being strongly opposed by Asian countries in response to its perceived aggression in the South China Seas. The quad of India, the US, Japan and Australia continues to take shape, with all increasing defence spending in response to China. How China responds to the increased pressure will have a huge impact on the peace and stability of the world.
3. The Middle East will become an even more dangerous place
While the war in Syria is effectively over, with the Syrian government and its Russian ally waiting to storm Idlib province there is still much potential for instability in the region. However Syria itself is being readmitted to the Arab League, a sure sign of a return to stability and Assad’s triumph. Turkey may invade the north of Syria to punish the Kurds it has long fought against, a move that will raise tensions with both Russia and the United States. To add to the problems Israel and Russia could potentially end up facing off over Israeli air strikes into Syria. It is not hard to see the US and maybe Britain stepping in to defend Israel if Russia strikes it. That would take the world over a dangerous precipice. All the while, Trump is slowly going to reduce the pressure on Iran, as he has been doing in Syria and Yemen. Overall a mixed and combustible bag.
4. Narendra Modi will be re-elected as PM of India.
Modi’s popularity has taken a hit in recent months, and the ruling BJP just lost three elections at a state level but there are important caveats. Modi personally easily leads his opponent Rahul Gandhi in polls. The economy is growing faster than it ever did under the previous BJP led coalition. It is not possible to fight a general election on purely local issues. All of which places Modi’s opponents at a potential disadvantage. This is important for the world as under Modi Delhi has become a key engine of global growth, being projected to overtake Britain as the fifth largest economy in 2019. That may provide big opportunities for trade, investment and growth for the world.
5. The markets will start the year low in the West, but will go on to recover.
Let’s face it, it’s not been a great year for markets. There have more falls than rises and overall sentiment is more bearish than bullish. There are solid economic and geopolitical reasons for that. Brexit not least. I still think that if Brexit goes ahead with a deal then the effect on market sentiment will be more muted than a no deal. There should be a recovery by the second half of the year based on global economic growth. One interesting thing to note is the growing shift to cryptocurrencies among many investors, whatever happens with Bitcoin. This may well be the future of global finance we are seeing here.
Predictions are a risky business, naturally. I hope 2019 brings growth and prosperity as well amidst the headwinds.