Heavy baggage for 2019

Published 13.01.2019 23:54
Updated 14.01.2019 00:06

What hit headlines on the first working day of the new year was the finding that China's gross domestic production (GDP) growth in the last quarter of 2018 would remain below 6.5 percent according to the China Finance magazine that is published by the People's Bank of China.

U.S.-based companies that sell a great number of goods to China lowered their sales and profit forecasts for the first quarter of 2019, expecting that the sales in the Chinese market would go down, to the short-term turmoil in currencies of many emerging countries. It seems that the economic circles and the financial markets are in a state ready to take an immediate position against all kinds of bad news in 2019. Even though Organization of the Petroleum Exporting Countries (OPEC) member and non-member countries have cut their production by 1.2 million barrels from Jan. 1 onward, the decline in the oil prices are still continuing due to the expected shrinkage in oil demand.

In the first days of the year, the U.S. Energy Information Administration (EIA) withdrew its crude oil price forecast to $61. Keeping in mind that Turkey is a country which primarily does substantial exports to first- and second-generation neighboring countries like Russia and Qatar, for the decline in commodity prices to not affect Turkey's export performance; we must have a strong target market diversification. It can be said that 2019 is a year whose luggage is full due to the global-regional political tensions and uncertainties over (primarily) the U.S.-China trade war, the global debt problem of over $250 trillion, the monetary policy preferences of the leading central banks and the Syria issue.

Under the EU title, let's also add to these issues Brexit, the elections for the European Parliament in May, the problematic Italian economy, the election of a new president to the European Central Bank (ECB) and the risk of recession for EU economies.

Let's not also forget the elections in India, Thailand, Argentina and South Africa. Developing economies will have to manage their monetary, fiscal and direct control policies with high caliber, attention and acumen for such a "loaded" 2019.

Countries' agendas full for 2019

All countries carefully followed by the international economic circles have a troublesome agenda for this year. In addition to the decline in inflation rates, the Chinese economy is going through a troubled period due to the loss in production and consumption rates; and the effect of the Chinese central bank sustaining the monetary expansion on the Chinese economy's performance is unclear regarding the level reached by real sector credits.

Having said that, how the first phase of the negotiations on the "trade wars" between China and the United States ended is also arousing curiosity. For the last one-and-a-half years, many international institutions have warned that "trade wars do not have a winner." Today, both the U.S. and the Chinese administrations are aware of the fact that trade wars are beginning to harm their country's economies. Therefore, they will appear to have produced a solution without losing their status.

On the U.S. front, it was understood that U.S. Federal Reserve (Fed) officials had made the new interest rate hike with hesitation, especially during the last month's meeting. On top of that, there are moderate statements coming from Fed presidents who are authorized to vote on monetary policy whereas there are "pigeon" statements from those who are not authorized to vote. The expectation and probability prospect that the U.S. economy is facing a recession; a serious depression has doubled compared to three months ago.

This is why the statements from Fed officials seem to have thrown the euro-dollar parity over $1.15. Things do not seem to be going easy on the EU front either. The European agenda is quite intense, from the Brexit vote in the U.K. Parliament on Jan. 15 to the European Parliament elections in May, from the concerns on the Italian economy, to who will be elected as the ECB president.

In the midst of these uncertainties, the World Bank pulled down its global growth expectations for 2019 and 2020. The global growth forecast for the end of 2018 has been lowered from 3.1 percent to 3 percent, for 2019, from 3 percent to 2.9 percent, and for 2020, from 2.9 percent to 2.8 percent. It expects the global growth to be 2.8 percent in 2021. While the World Bank predicts for the developed economies to close the end of 2018 with 2.2 percent, it has shaped its forecast as 2 percent for 2019. The same data for developing economies for the end of 2018 has been dropped down from 4.5 percent to 4.2 percent, for 2019, from 4.7 percent to 4.2 percent, and from 4.7 percent to 4.5 percent for 2020.

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