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Canada: When your neighbor’s house is on fire…
November 9, 2016
Morning sickness hit global markets this morning, as the world begins to digest the political earthquake that took place yesterday. Declines were recorded in major stock indices and currencies fluctuated as Republican candidate Donald Trump astounded pollsters and won the U.S. presidential election, after a divisive and controversial campaign. The result surprised the vast majority of our analysts, over 80% of whom had expected a victory for Democratic candidate Hillary Clinton, and has heightened global uncertainty dramatically. Our analysts saw Clinton as having a better economic plan, a better grasp of economics and assembling a better economic team than Trump, which combined would help fuel faster growth in the U.S. As a result, the surprise election of Trump has cast a cloud over the outlook of the world’s largest economy. While Trump’s inconsistent and impractical campaign pledges make it difficult to decipher the impact his Presidency will have, major policy changes in the U.S. could have spillover affects felt across the globe.
Short-term pain before long-term gain? A look at French labor reform and economic growth
November 8, 2016
The French economy has come under the spotlight again after disappointing GDP growth in the third quarter. Even the French government has now finally admitted that its 1.5% growth forecast for 2016 is overly optimistic, long after our analysts downgraded their forecasts. Ironically, one of many factors that has dragged on economic growth in France this year has been the ostensibly pro-growth labor reform introduced in the summer, or rather the strikes over it. These weighed on domestic demand earlier this year and will thereby play a part in penalizing France’s overall GDP growth in 2016. This calls for a closer look at the labor reform and what it means for French GDP growth going forward, particularly in a short-term perspective. Such a structural reform, if introduced in an already robust economic context, should have positive consequences for the economy almost from the outset. In the current environment of weak demand and constrained macroeconomic policy, however, the potential losses of the reform could well exceed the potential gains in the short-run, regardless of the eventual benefits that should hopefully win over in the medium- to long-term.
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Asia: Unremarkable growth & unfulfilled promises?
October 25, 2016
Is Asia’s economy stabilizing? Will Asia ever fulfill its promise of being the driving engine for global growth? Will China get back to the booming growth of a few years ago or has the last year been a sign of the beginning of the end? Will India usurp China as the darling of the Asia-Pacific economy? These are some of the questions on the tips of tongues of many, and we try to answer those questions and more in our progress report on the Asian economy so far in 2016.
How India's latest monsoon is affecting the economy
October 24, 2016
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"A stronger monsoon should drive up rural income and add to the already favorable tailwinds to consumption. Our panel raised their GDP forecast by 0.1 percentage points this month and now see the economy expanding 7.6% in FY 2016. For FY 2017, the panel sees growth stable at the robust pace of 7.6%." - Angela Bouzanis, India Senior Economist
Russian economy update in wake of OPEC deal announcement
October 20, 2016
On 27 September, the Organization of the Petroleum Exporting Countries (OPEC) reached a preliminary deal on restricting crude supply in order to support prices. The OPEC deal, which had been mooted as a possibility since February, was the first such agreement in nearly 8 years.
The announcement of the deal appeared to improve market sentiment, as global oil prices jumped 6% right after the announcement and headed towards USD 51 per barrel in the first few days of October.
The oil production deal is good news for Russia, one of the hardest hit economies by the drop in oil prices observed in the last few years.
Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
October 20, 2016
The weak economic performance seen this year in Latin America has accentuated the need to increase productivity as a key vehicle for more solid and sustained long-term growth. Supporting innovation is a crucial component in the productivity equation, and yet the outlook for this in Latin America is bleak: weak public finances are expected to reduce spending on research and development (R&D) even further this year. Although not all is gloomy and some gains may come from ongoing trade liberalization, Latin America will continue to lack the dynamism of its emerging-economy counterparts as little progress is expected on structural reforms that would grant all stakeholders the same opportunities to succeed.
The consensus is crystal clear among analysts and business leaders that innovation is key to increasing output and productivity, and is a crucial driver to sustainable long-term economic growth. However, measuring innovation in national economies is always tricky: the concept is intangible and not specifically measured by central banks or national statistical institutes. Nonetheless, international agencies, such as the United Nations Educational, Scientific and Cultural Organization (UNESCO) and the Organization for Economic Co-operation and Development (OECD) provide guidelines on how to measure innovation, incorporating variables like expenditure on R&D, incorporation of new technology, growth in labor productivity, number of patents per capita, as well as education standards. Moreover, the policy environment is equally vital. A solid competition policy, a stable contractual environment and an agile bureaucracy are more likely to encourage new entrepreneurs to invest in start-ups and existing players to raise capital investment to grow businesses.
The Wisdom of the Crowds and the Consensus Forecast
October 14, 2016
“A centrally planned economy could never match the efficiency of the open market because what is known by a single agent is only a small fraction of the sum total of knowledge held by all members of society.”
- F.A. Hayek, Economist, and Philosopher
When you think about economic forecasting, you can think of the quote above as analogy – in a “centrally planned economy,” the planning agency can be thought of as an individual forecast and the “open market” as a multiple-source forecast. The Consensus Forecast, however, is the market price in as much as it reflects all of the knowledge available.
There's no end in sight to the Venezuela crisis
October 13, 2016
Venezuela, as a country, has seen better days. The economy is in particular disarray. As a result, in our latest LatinFocus Consensus Forecast report for Venezuela, we project the economy contracting 9.7% in 2016.
The crisis doesn’t look like it will be ending any time soon. Along with the disaster that is the economy, political turmoil, which stems largely from the economic crisis, has caused much uproar among the masses and has left President Nicolás Maduro’s government scrambling to keep its stranglehold on power.
Can the peso predict the U.S. election results?
October 13, 2016
When Trump rises, the Mexican peso falls, so could the peso exchange rate forecast predict the outcome of the upcoming U.S. elections in November?
Click the image to open full-size infographic
A Look at the European Union Political Calendar
September 29, 2016
The European Union is facing an unprecedented amount of uncertainty. Brexit, a migrant crisis, elevated security concerns, a slowdown in China and unpredictable elections in the United States are all threatening the Union’s economic and political outlook. On top of this, members within the Union are facing a jam-packed election cycle. In a context of waning support for the status quo, this could lead to shifts in the balance of power. Senior Economist Angela Bouzanis takes a look at the upcoming votes we are keeping an eye on and why.
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