Important Events for the Global Economy in the First Half of 2016

Important Events for the Global Economy in the First Half of 2016

By any measure, global economy news in the first half of 2016 were rather uninteresting. Previously growing economies continue to grow, previously struggling – still experience a downturn. And these trends are quite likely to carry on through the second part of 2016. But nevertheless there were several major developments that are worth covering, with a few more expected to reveal by the end of this year.

Migration to Europe Has Not Stopped the Growth

Despite major spike in migration to Europe through previous 16 months, EU economy has not suffered, with GDP solid growth of 0.8% in the first quarter. It is worth noting that by April this year the number of migrants has reached its lowest level since March last year, when the crisis unfolded, with twenty thousand people per month. This has a lot to do with unwillingness of many EU member states to accept more migrants, and the migrant relocation deal struck with Turkey.

Negative Interest Rates in Germany

German Chancellor Angela Merkel, who currently enjoys her popularity recovered after relatedly successful implementation of her Willkommenskultur towards migrants, through which Germany was very tolerant and welcoming towards its new citizens, faces yet another problem. Germany is gradually following in the steps of Switzerland and Japan, the two countries experiencing negative interest rates since the end of January.

Great Britain, Brexit and Slump in the Pound

The United Kingdom managed to avoid much of continental problems just to face an unexpected problem of its own making – UK voted to exit the EU, much to the shock of its PM, David Cameron (campaigned vividly to stay in), who quickly resigned as the results came in. Results clashed with the fact that UK lived one of the strongest economic growth in the Western world with less than 5% unemployment rate. New PM, Theresa May, made it clear that “Brexit means Brexit”, even though many who voted ‘Leave’ now regret it – there will not be a U-turn on the referendum. Even though the pound is at its historical weakest to the US dollar in the last three decades, virtually no changes are expected in the following couple of years.

The USA, Increased Interest Rates and Strengthening the Dollar

The United States’ economy is in a good shape, and monetary policy of the FED, as well as its currency, reflects just that. The Federal Reserve System was the first central bank of the Rich World to increase interest rate after the recession, with further 0.5% increase plans on the table. No wonder the dollar is on the rise against other currencies. As some Eurosceptics forecast, pointing at the solid economic growth in the US, – parity with the Euro is expected by the end of this year.

What will the US election bring?

Next US elections later this November, regardless of the outcome, will make history. Either country will elect Hilary Clinton as its first female president, or Donald Trump, her Republican rival and a newcomer to federal politics. Mr Trump gained popularity by making controversial statements and laying out generalized polices, making it very hard to predict immediate implications of his presidency for US economy, yet some analytics point out a further potential decline of oil prices and stronger US dollar in case of his election to the Oval office.