by Aad Weening – 27 January 2017

As this is my first blogpost of 2017, my very best wishes to our readers for the year ahead, both privately as in business. Nobody knows of course what the year ahead of us will bring but it promises to be an interesting and challenging year, that’s for sure.

First of all: the inauguration of Donald Trump on 20 January last as the 45th president of the USA. As I got it, the basic message Mr Trump gave in his acceptance speech was: “America First”, indicating a more protectionist policy, which I think might have serious effects on both the global and the American economy. For instance, abandoning the Trans Atlantic Partnership will undoubtedly have its impact on global economic relations and might have serious effects on world trade. Levying heavy import duties on goods coming into the USA will in my view fail to have the intended outcome, but will result in higher prices for US consumers and consequently less spending power.

According to the recent January 2017 forecast of the IMF, global economic activity is projected to pick up pace in 2017 and 2018, especially in emerging markets and developing economies. Hereunder an overview of the IMF World Economic Outlook Projections of January this year (in percentages):

Country – Year

2015

2016

2017

2018

World

3.2

3.1

3.4

3.6

Advanced Economies

2.1

1.6

1.9

2.0

Emerging Economies

4.1

4.1

4.5

4.8

USA

2.6

1.6

2.3

2.5

Euro Area

2.0

1.7

1.6

1.6

UK

2.2

2.0

1.5

1.4

China

6.9

6.7

6.5

6.0

Russia

-3.7

-0.6

1.1

1.2

Brazil

-3.8

-3.5

0.2

1.5

However, according to the IMF: “there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy stance of the incoming U.S. administration and its global ramifications”!

Another interesting event was the speech of Theresa May, UK Prime Minister, presenting the Plan for Britain with the government’s views on the UK – EU Brexit negotiations.

One of the issues is the trade deal between both parties, in particular with respect to Britain’s membership of the EU Single Market, which is all about the free movement of not only goods and services within the member countries of the EU but also about free movement of people, which was one of the reasons a majority in the UK voted to leave the EU.

Just some figures to give an idea of what is at stake:
In 2015, about 44% of UK exports (£220bn or  $275bn) in goods and services went to EU countries.  That share has been declining, because exports to other countries (56% – £280bn, $350bn) have been increasing in the last years at a faster rate. It is estimated that over the next ten to 15 years, 90% of world demand will be generated outside Europe.

In that respect the title of Mrs May’s speech “ A Global Britain” was quite revealing, underlining Britain’s desire to strengthen its position on the global trade market.

It is most certainly not up to me to discuss and comment here on the political issues involved. What concerns me is –as is the impact of the changing of the guards in the USA– the impact on both businesses and consumers, which in the case of Brexit would depend on the new relationship between the UK and the EU primarily and the trade deals with other countries and regions in the world.

Over the past years we have seen an ever-increasing share of cross-border trade to and from the EU and other regions of the world, as businesses have recognised the great opportunities out there. This more open trade has also been to the benefit of consumers resulting in more choice, more competition and better prices. Falling or continuously fluctuating currencies and economic disruptions will result in less consumer confidence, higher prices, less consumer income and fewer spending.

As I said, a challenging year ahead and we will most certainly follow what happens in the US, the EU and on the global scene and the impact this will have on businesses and consumers.