1.Brexit: If Johnson’s deal goes through it’s not the end of Brexit – far from it. We could easily end up with a No Deal Brexit in December 2020. As the second-largest economy in Europe and the fifth-largest in the world, the UK, because of its departure from the EU, has the potential to send Europe into a recessionary tailspin. And, of course, this can spread to other regions around the world with particular impact on emerging and frontier markets.
2.US-China trade war: The IMF estimates that by 2020, the US-China trade dispute – even without further escalation – will have hit global output by 0.8%, with much of the impact resulting from increased uncertainty.
3.Geopolitical Tensions: Developments in geopolitics such as in Syria recently, continue to threaten global economic stability. Example: Iran nuclear threats, The Iranian government are shortening its nuclear breakout time — the amount of time required to produce enough weapons-grade uranium for a single nuclear weapon. Tehran has accomplished this through several steps in the last few months.
4.US election 2020: If Trump does win a second term, he cannot always be expected to pursue traditionally conservative economic policies, such as his 2017 Tax Cuts and Jobs Act and there so many other candidates still on the field, investors and financial markets seem to be awaiting stronger signals about the political future and the considerable, but different, economic and financial risks that a victory by each would entail.
5.Global Recession: Trade war remains the key risk factor in the US, and is something that could spread across the globe. Global growth is slowing from an already low base. The negative impact of increased uncertainty spreading from trade and geopolitical tensions.
Example: The U.K., with its ongoing uncertainty over leaving the European Union (and still no end in sight), has watched its economy recently shrink for the first time since 2012, and a no-deal Brexit could well slide it into a recession.
6. Further Intrest rate cut by central banks: Globally, low and even negative interest rates are set to stay. We expect one more US interest rate cut in the first quarter of 2020. In our view, current unconventional monetary policy and negative interest rates do more harm than good, with adverse effects on the real economy and functioning of financial markets. The US Federal Reserve (Fed) has already cut rates three times this year, and we expect another cut in early 2020. The Fed will also publish the results of its year-long review of the monetary policy framework, tools and communications in the first half of 2020.
7.Risks of oil price plunge in 2020: The global oil market currently looks unstable and uncertain. Russia’s oil market may face the supply glut in 2020 despite the OPEC+ deal participants’ efforts to constrain the supply growth, the International Energy Agency warned in July. US-China trade wars will also affect the price volatility and supply growth in 2020. The risks of the oil price plunge in 2020 to $50 per barrel.
8.Mortgage Rates Likely to go lower in 2020: The 2019 housing market has been one of the low rates, high demand and limited supply—particularly on the lower-priced end of the market. Next year, according to Fannie Mae, rates could drop as low as 3.4%.
9.U.S. Manufacturing Continues to Slow: If the United States and China continue to ratchet up tariffs on each other’s goods, we expect the manufacturing sector continues the downward pressure in 2020.
10.Pervasive Insecurity & Cyber Warfare: We foresee a more pervasive sense of insecurity, which may be as much based on psychological perceptions as physical threats, by 2020. , include concerns over job security as well as fears revolving around migration among both host populations and migrants. Terrorism and internal conflicts could interrupt the process of globalization by significantly increasing the security costs associated with international commerce, encouraging restrictive border control policies, and adversely affecting trade patterns and financial markets. A growing range of threats including terrorists may acquire and develop capabilities to conduct both physical and cyber attacks against nodes of the world’s information infrastructure, including the Internet, telecommunications networks, and computer systems that control critical industrial processes such as electricity grids, refineries, and flood control mechanisms.
Syam KP, GulfBrokers