US President-elect Donald Trump’s future policy stance poses “the single largest risk to the global economy,” according to a client survey by forecasting firm Oxford Economics Ltd.
More than half of respondents said that the probability of a sharp slowdown has increased over the past three months, according to the firm’s November 14-21 survey on global risk perceptions conducted among about 180 clients and contacts.
Twenty-seven per cent said a potential trade war triggered by Trump was the top risk to the global economy over the next two years, followed by 23% who said a more severe downturn in the Chinese economy was the top risk. Trump also was seen as the most likely source of faster global growth, with 38% citing the potential for the US economy to surge on new fiscal stimulus he has proposed.
Trump often invoked China during his campaign, threatening to slap tariffs on its exports and vowing to label it a currency manipulator. He spoke Friday by phone with Taiwan President Tsai Ing-Wen, prompting a protest from Beijing, which regards the island as its territory. Trump took on China’s government on Sunday in a series of tweets criticising it for currency manipulation, barriers to foreign competition and militarising the South China Sea.
The survey results show a “marked shift in the global economic outlook” Jamie Thompson, Oxford’s London-based head of macro scenarios, said in a statement with the survey. “With the degree of policy and political uncertainty unusually elevated, the greatest source of risk to the global economy - both to the upside and the downside - is undoubtedly now the US policy stance.”
Aside from Trump and China, the biggest downside risks over the next two years were seen as geopolitical tensions such as Iran, Russia, the Middle East or South China Sea; continued Federal Reserve interest rate increases spurring emerging market concerns; rising populism in the EU; Brexit-related uncertainty; and a sharp jump in oil and commodity prices.
The top catalysts for growth, after potential US fiscal stimulus, were fiscal policy being loosened globally; global productivity rebounding; Brexit spurring EU reform and Germany driving stronger eurozone growth, according to Oxford’s survey.
The global economy will expand 3.1% this year and 3.4% next year, according to the latest World Economic Outlook by the International Monetary Fund, released in October. The fund lowered its 2017 forecast to 3.4% from 3.5% in July.
Trump has discussed investment proposals, which include roads, bridges and airports, ranging from more than $500bn to $1tn over a decade. He said in a recent speech that he aims to make America’s infrastructure “second to none” while putting millions of people to work and doubling economic growth.
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