Opinion. Codrut Pascu (Roland Berger): Political forces will shape the economic landscape in 2017

Newsroom 09/02/2017 | 14:53

Immense social pressures resulting from major discrepancies in income distribution and systemic middle-class job losses in some regions (and industries) have given way to new political currents, increasingly popular, but still in search of a functional economic ideology. 2017 will therefore bring about major challenges for the global economy, resulting from attempts to realign the status quo established within the last decades and redefine business models for organizations worldwide.

First of all, the extent to which the Trump administration will succeed in putting in place the entirety (hard to believe) or just part of its economic agenda will set the stage on several fronts: global trade, relocation of production capacities, capital movements by large corporations facing fiscal changes, massive infrastructure development programs and, maybe most importantly, potential realignments of global value chains by geographical criteria.

Secondly, China is facing problems inherent to the development stage its economy has reached, currently in search of a new model to sustain growth. A pivot towards domestic consumption will probably accelerate, versus its historic focus on exports, and the country’s relationship with the US will go through challenging times. This will have repercussions for the entire Asia-Pacific region, which has become an export machine, geared towards China and the US, and which, together with China, has long been the growth engine of the global economy.

Last but not least, Europe will see elections in its key members, Germany and France. Following Brexit and the Italian referendum in 2016, the European structure has been further weakened and is increasingly exposed to potential pressures due to elections in the two countries. The Eurozone remains fragile, threatened by economic challenges in several countries: in Italy, the banking system is on the edge of a crisis and anti-Euro sentiments are spreading. An Italian exit from the Eurozone would be a further shock, too strong to bear.

All of these challenges demand complex solutions and strong leadership. It is difficult to say, for example, whether the Eurozone can continue existing without undergoing structural transformations. But given the current political context, further complicated by elections in the European landscape, 2017 could very well turn out to be another year in waiting, as we risk not seeing the strong decisions needed on the global stage.

 

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