With the Lunar New Year of the Wooden Horse just around the corner, business of all shapes and sizes are gearing up for the challenges and opportunities of 2014. This promises to be an eventful year, with many of the previous year’s endeavors and investments coming to fruition, and in the same vein, all the economic and geopolitical tensions that started in 2013 will see their imminent conclusions.
For the big movers and shakers of the realms of commerce and politics, their decisions will shape the events of the upcoming year. For the rest of us, we should stand ready, ear to the ground, anticipating the movements that will mean either prosperity or adversity. The business-minded entrepreneur will be particularly keen in observing the scene, and the following anticipated events will definitely be great influencers to their decision-making:
The second-largest world economy is more powerful than ever, and their actions and reactions have palpable waves of effect throughout the globe in just about all aspects imaginable.
To the United States, they are a major trading partner and one of our biggest debtors. China has declared that it will make a fundamental change in its financial relationship with our country, and it has many people concerned:
“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Neither Yi nor Zhou gave a timeframe for any changes.”
In geopolitical events, China has been increasingly aggressive in asserting its claim to various territories and islands over the South China Sea, straining its diplomatic relations with Japan, the Philippines, Malaysia, Brunei, Vietnam, and Indonesia. In this year, the threat of deliberate military-backed action becomes an even greater possibility. Economic pressure is also something China can flaunt, with many of its neighbors also heavily dependent on trade with the big nation.
On the homefront, various events and decisions will also be felt by the global economy, for better and for worse.
“Fed officials will debate at that meeting whether to keep scaling back their bond-buying program, which aims to lower long-term interest rates to help boost growth and hiring. The Fed cited a brightening economic picture in December when it decided to cut the monthly pace of bond purchases to $75 billion, starting in January, from $85 billion previously.
Mr. Bernanke said at a press conference after that meeting that Fed officials would likely continue paring the bond buys by $10 billion at each meeting if the economy keeps improving as they expect. But he stressed that the process is not on a preset course. If the economic data disappoint, they might leave the amount of bond purchases unchanged at a meeting. If the recovery picks up more than they expect, they might cut it by bigger increments.”
This region of the world continues to be a hotbed of violence and strife, with a full-blown civil war in Syria and political unrest and terrorist activity in Egypt, Iraq, Iran, Palestine, Yemen, Tunisia, Lebanon, and other Middle-Eastern countries.
Peace and order has a major effect on the economic prosperity of any country, and given the lack of stability in the Middle East, it can only mean further economic hardships for this part of the world.
Former UK Prime Minister Tony Blair recently shared some insights concerning the state of the Middle East, and while it doesn’t particularly tackle the economic aspect, the ongoing result of such strife is often great poverty and deprivation of rights and basic services to the populace.
The Eurozone looks to be past most of the worst of their financial crises, but the European Central Bank authorities are still on guard and cautious about the growth and direction of the collective regional economy. Still, they are eager to put the past behind them and start growing their economies anew.
“The ECB has set the bar high for taking more measures to spur economic growth. It expects sluggish growth of 1.1% in 2014 and 1.5% in 2015, and thinks inflation will stay well below its 2% target for two more years. Unless growth and inflation undershoot that already weak baseline scenario, additional action is unlikely.
ECB executive board member Benoit Coeuré put it bluntly on Dec. 9: “I don’t see a need for use of spectacular measures.”
Richard Barwell, an economist at RBS said, “They’re not going to move unless inflation surprises to the downside from what they’ve got” in their forecasts). If they do act, “it’ll come down to what’s the easiest thing for them to do with the least side effects.”
To answer the question posed by the title, the global economic outlook for 2014 will pretty much be a mixed bag, and heavily dependent on the region the observer is focused on. Regardless, even in the direst of situations, opportunities for growth and prosperity are still available, so tighten that belt a little, keep a sharp eye on the trends, and march forward to a promising new year of business!
About the Author
Michael Green is a veteran of the rat race, having worked at a business consultancy firms in San Francisco and New York for most of his young adult life. He left on his fortieth birthday to become a fully self-employed entrepreneur, and settled in San Diego to pursue various opportunities within the city. Michael is fond of setting up and starting small businesses, and he relies on companies like Dealstruck to provide his ventures with much-needed startup capital.