GLOBAL FINANCIAL CONDITION: PREDICTIONS FOR 2015

As 2015 is on course, the key trends that will define the remainder of the year are coming to the surface. Debt reckoning in the U.S., stagnation in the European economy, weakened credit worthiness of China, sluggish development in emerging economies, and sharp drop in oil prices will be controlling the movements of the global economy in 2015. Here are five predictions based on market data and trends that have emerged thus far.

The United States: Collapsing under Consumer Debt

According to the finance and economics editor of the Guardian, Heidi Moore, the United States will face a debt reckoning in 2015. The U.S. consumer debt, amounting US$ 3.2 trillion, and the recovery of non-prime lending are the greatest threats to the nation’s economy, which otherwise seems to have reverted to its pre-recession economic state.

The financial outlook for the U.S. for 2015 will depend on individual stance, particularly on risk tolerance of an individual. If one has enough wealth to put in the market and keep calm, 2015 will most likely to be another rewarding year. However, for the ones with lower risk capacity, 2015 will be one more year of misery, just like 2009, 2010, 2011, 2012, 2013, and 2014. A national survey by CNN/ Opinion Research Corporation states that 84% of the U.S. citizens believe that post recession, the U.S. economy has not improved at all, while 70% think that the financial system has got a permanent scar on it.

Europe: A Number of Challenges Waiting Ahead

“Without major structural reforms, Europe will face troubles”, Robert Kahn of Council on Foreign Relation was quoted as saying recently. Development as well as investment in the market is very low.The rocketing unemployment rate is making the economy look beaten-up. The region will have to face numerous new challenges from both within the continent and overseas. People are dissatisfied with the government rules, regulations, and initiatives. The rising discontent among Europeans is fueling rejectionist politics.

Even after this, Europe has scope to recover. The recently announced ‘Quantitative Easing’ program may assist in enhancing commerce and confidence of the consumer. The weakened euro will assist in balancing the negative effects from moderate exports to emerging markets. But, the non-operational policy environment for accelerating development by investment and reforms in Europe can slow down the recovery process.

China: Maintaining Soft Landing Trajectory

“China, being in the mid of a flimsy rebalancing act, will be curtailing the GDP growth to favor the financial, structural, and energy reforms”, affirmed Damien Ma of the Paulson Institute, recently. China will be continuing its ‘Soft Landing’ growth trajectory, as already controlled government initiatives will be less effective in spite of recent monetary easing. The weakening of the creditworthiness of China will be clearly exposed restricting foreign investment in the nation.

Emerging Economies: Oil Prices and Exchange Rates Affecting Growth

The rise in developing economies will be restricted by global economic complexity at least for the first quarter of 2015. Emerging economies, such as India, will appear to be poised for considerable growth in 2015.Other major developing nations will keep on growing, but their speed will depend upon the impact of slumping prices of oil and depreciating exchange rates, as well as advancement of their own reformative agendas. Growth in Africa and parts of Asia provides opportunities to construct sustainable development models but also carries challenges on financial, legal, and institutional fronts.

Oil Prices: To Witness a Down-fall to US$ 40 per Barrel

For years, Saudi Arabia had maintained that it did not feel any threat from the rising production of U.S. shale, and that it would keep on controlling oil prices. However, now it has gone back on its word, pushing its pumps to their maximum capacity and pressing oil prices below US$50 per barrel.

Oil lost more than half of its previous year’s value, dropping from a peak of US$ 107 in the previous summer.In the first quarter of 2015, oil prices will continue to be at depressed levels, possibly dropping as low as US$ 40 per barrel. However, oil is projected to recover and return to normal levels in the second half of 2015.

About the Author

Juhi is a writer with Transparency Market Research, a U.S.-based market intelligence firm. She has a penchant to track the global economy and she possesses exceptional knowledge in the area of banking and finance. With an educational background in Economics and Commerce, she gets a broad base to approach various topics relating to BFSI sector.