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In its latest analysis, Citibank has compiled the 13 questions that may be most important in 2021:
1. What to expect from the new American leadership?
After the inauguration of Joe Biden, the question is no longer whether the transition will be peaceful, it seems that by now Donald Trump has also accepted his defeat. Citi analysts say that Biden’s presidency could be very different from Trump’s leadership in the last four years, on the one hand, it could depend more on government agencies and, on the other hand, “green” initiatives and the development of infrastructure could play a much larger role. In foreign policy rather, cooperation may characterize the next few years with external rivals such as China, and economic policy can be based on raising taxes and tightening regulations.
2. What avenues of recovery will vaccines allow?
US bank experts say coronavirus vaccines In developed economies, it will only have a significant positive effect in the last quarter of 2021, and in the emerging region this may slide into the first half of 2022. It is clear that rich and developed countries will receive the vaccine sooner, since they have completed 85% of pre-orders, there are countries that have already contracted more vaccines than the population. The vaccines began in late 2020, but will only be massive in the second through third trimesters, they add. The vaccination of a large part of the population could have a positive economic impact due to the lifting of restrictions, especially in Europe.
The biggest concern now is the rejection of the vaccine in many countries, if vaccination cannot reach the 70% required for herd immunity, it could also halt recovery.
3. What are the chances of a financial crisis now?
Today’s financial conditions are the most threatened by inflation, and most experts say there is little real inflationary pressure in the world, but there are growing signs that this may change in the coming months. And that may come as a surprise to investors who have just backed out. By the way, financial conditions recovered relatively quickly during the recovery from the crisis, and the credit market returned to normal in most countries, but due to inflation risks, these conditions cannot be considered as lax as before .
4. Is the dollar really coming?
Today, there is broad consensus among analysts that 2021 could be the year of the weakening of the dollar, this process has already started in the final months of 2020. The weakening of the dollar is supported by several things: the greater fiscal stimulus expected from the Biden administration, the flexible policy of the Fed and the situation of vaccines are against the dollar as well as the important global role of the dollar and the prospects for rising inflation and a flattening of the yield curve. may. However, there are also counterproductive factors, such as extreme positioning, which shows that too many expect the dollar to weaken, the expected convergence of US and European inflation, which may support the strengthening of the dollar, or the expected slowdown of the buy program. of Fed assets. In addition to new impressions by the ECB.
5. Can house prices go up?
In addition to the ultra-flexible monetary policy of central banks, the real estate market has been an attractive investment opportunity in recent years, with supply-demand effects that predict further increases in real estate prices, as options cheap financing is easy for anyone to obtain. And a strong housing market can also support the economy and even offset some of the negative effects of the coronavirus. However, it is important that this is sustainable because the bursting of a housing balloon would threaten another recession. The separation between inflation and house prices may persist, as the inflation basket does not include house prices, only rents, Citi analysts add.
6. Will climate protection really be a priority?
China, the largest emitter of carbon dioxide, has pledged in recent months to achieve carbon neutrality by 2060, and Joe Biden has also put climate protection on its flag in the election campaign. America’s return to the Paris climate agreement can have symbolic meaning, a broad global consensus to address climate change. The EU and Japan have previously set a goal of total carbon neutrality by 2050, and if China and the US join forces, the countries responsible for more than 50% of CO2 emissions could reach a common position.
7. Can Big Tech Companies Finally Be Regulated?
For years, there have been initiatives around the world that would restrict big tech companies, initially coming from outside of Europe. The most important thing now would be a single European tax on digital services, which could mean real regulation. It is not yet known what the Biden administration’s position may be on this, as the new president will help tech companies by facilitating the immigration of skilled labor, and he has previously criticized sites that allow fake news. The Antitrust Committee of the US House of Representatives has been investigating tech giants for more than a year and a half. In China, at the moment, the news is that they want to crush the power of the biggest Chinese companies.
8. Can relations between the United States and China improve?
Under the presidency of Donald Trump, relations between the United States and China have reached their worst level since diplomatic contacts in 1979, the United States government has imposed punitive measures and the geopolitical situation has been tense between the two countries on several occasions. Now it seems jumping Joe Biden may be less confrontational with China, but relations will not return to pre-Trump levels. The parties have many common interests, such as the fight against climate change, the disarmament of the Korean peninsula or the fight against global terrorism. The new president is also expected to see China as a strategic competitor, but will be able to strike a much better balance between competition and cooperation.
9. Will the economic disintegration of Europe continue?
In addition to recovering from the crisis, a key question will be that the different economic perspectives of European countries may once again put the cohesion of the European Union and the euro area to the test. Citi estimates that the GDP of one of the most affected Spain is currently 8 percentage points lower than its normal pre-crisis trajectory than Germany. And these scissors are not expected to close if the vaccination required for herd immunity has not been achieved by the summer of 2021, and this could affect the private sector and the public sector as well. And that could strengthen populist anti-EU political forces or pose a risk to the disintegration of the eurozone. The most important issues in European politics this year could be Angela Merkel’s successor, the outcome of the Dutch elections and the harbinger of the French elections in the spring of 2022, in relation to which it will be important to know who will fight Emmanuel Macron. . Furthermore, it will be important to pay attention to the difference in economic performance between the EU27 and the UK after Brexit.
10. Are the real costs of Brexit finally revealed?
Four and a half years after the 2021 referendum, the UK has achieved what it wants, they can finally ‘live freely’. According to Citibank analysts, in addition to the weakness of the British pound, Brexit could have significant economic effects this year, experts estimate that the GDP of the United Kingdom could be 2 percentage points lower than if it had remained as part of the common market European and customs union.
11. What could be the policy of the new American leadership in the Middle East?
The presidency of Donald Trump has brought significant changes to US policy in the Middle East, including Joe Biden. What will not change is expected to continue with the withdrawal of US troops from Afghanistan. However, as part of the new president’s cooperative policy, the United States could return to the Iran nuclear deal in some form. In relations with Israel and neighboring Arab countries, Biden may support peace, receive harsher criticism from Saudi Arabia and the United Arab Emirates for their arms sales in the past, but alongside these, the US leadership can see to both countries as important partners.
12. Can Black Africa get into debt?
There are more and more opinions about it in the coming months several black African countries may face a debt crisise, according to some, if the first domino falls, it will bring more bankruptcies. Citi says there is no really serious threat of state bankruptcy, but some of the debt could be renegotiated with policyholders and the Chinese leadership as a major creditor. Economists point out that a crisis is always a good time for big changes, like tax reforms. The big question for the next few years is whether such a process can be started in Africa, although similar important reforms are often politically difficult to undertake.
13. Can politics return to the center of attention in Latin America this year?
There is a corner of the world that has not been talked about before, and that is Latin America, where 2021 could be a busy year. They are holding presidential elections in Chile, Ecuador and Peru, and they want to pass a new constitution for the first country.
Cover image: Getty Images
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