OMFIF believes Trump’s ‘wayward behaviour and rhetoric’ will exacerbate the damage in geopolitics and economics
January 2, 2017: The year 2016 was filled with action. The Official Monetary and Financial Institutions Forum (OMFIF), a research firm, expects 2017 to be along the same lines. Many lines of political and economic risk intersect the US, China and Donald Trump’s incoming administration. According to OMFIF, there is a spike in US bond market yields and heightened financial volatility disturbing global markets while Trump’s ‘wayward behaviour and rhetoric’ will exacerbate the damage in geopolitics and economics.
OMFIF expects wavering stability in China. Tension between Washington and Beijing could take various forms, ranging from disagreement in the UN Security Council to trade tariffs and even to an armed conflict. Trump’s economic policies will spur major reform in the US tax code and more Federal Reserve tightening. They could also provoke a trade war with China.
There will be challenges in the Middle East, Russia and Europe. OMFIF is anticipating a fallout between US and Iran over the nuclear deal. Also, a deal between Trump and Russian President Vladimir Putin could increase Russian influence in Syria and Eastern Europe.
Domestic forces, too, could cause instability in Europe. Elections are due in Germany, France and the Netherlands, as well as possibly in Italy – the four biggest euro area economies and founding members of the European Community. They will confirm global political influences already visible in Britain’s decision to leave the European Union as well as the Trump victory. Here, immigration will be a key factor. OMFIF thinks that Angela Merkel will most likely remain chancellor after the autumn poll, though no politician in Germany will be a clear winner.
Other elections could enter the narrative. Greece’s prime minister may gamble on a new poll, even though he may lose while the success of Italy’s new government is far from secured but the economy is fundamentally resilient.