On Tuesday, December 3, analysts at Danish investment bank Saxo Bank published a list of “shocking predictions” for 2020. In their report, experts traditionally consider probable phenomena in the global economy.
Moscow double win
According to analysts at Saxo Bank, in 2020 the Russian economy will receive double support due to a sharp rise in the price of oil and industrial metals. According to experts, the countries participating in the OPEC + deal will again reduce oil production. As a result, the supply of energy in the global market will decline, and world oil prices could rise to $ 90 per barrel.
The excess profits from the sale of hydrocarbons Russia will be able to channel to the financing of national projects. Saxo Bank chief economist Steen Jacobsen said this in an interview with RT.
- Steen Jacobsen on a possible increase in world oil prices
Russia can also benefit from a record increase in palladium prices. Since the beginning of 2019, scarce metal has risen in price by more than 50% - up to $ 1820 per troy ounce. As expected, the demand for raw materials will continue to grow thanks to global automakers - palladium is used in the catalysts of gasoline vehicles for burning exhaust gases. At the same time, Russia remains the largest supplier of precious metals in the world (with a market share of more than 40%).
“The growing focus on climate policy around the world continues to increase long-term interest in electric vehicles and vehicle emissions controls. Russia is benefiting as the world's largest supplier of palladium, ”says a study by Saxo Bank.
Echo of the Great Depression
Saxo Bank believes it is likely that by the beginning of 2020, the United States and China will be able to agree on a ceasefire in the tariff war, so world trade tensions will begin to decline gradually.
In 2018, Washington accused Beijing of illegally acquiring U.S. technology. According to the White House administration, the result of China’s actions was a huge US trade deficit with the Asian republic of $ 375 billion. As a result, the United States increased duties on Chinese goods imported into the country, and China introduced retaliatory measures.
After a series of negotiations in May 2019, the United States began to aggravate the conflict: in addition to introducing new duties, American technology companies began to stop cooperation with Huawei. In August, the countries again failed to compromise on the terms of the trade deal and introduced new mutual restrictions in September. However, in September, Beijing agreed to purchase US agricultural products in exchange for lifting some of the restrictions on Huawei. Following this, the parties resumed negotiations.
- US President Donald Trump and PRC Leader Xi Jinping
- © Kevin Lamarque / Reuters
At the same time, the long-awaited truce between the States and China may not last long, Saxo Bank analysts say. According to experts, instead of canceled duties, the United States may begin to charge companies 25% VAT on all revenue received from production abroad. Thus, in order to avoid high taxation, foreign and American businesses will have to transfer production to the United States.
“At the beginning of 2020, the US economy will begin to“ suffocate ”, the trade deficit with China will not improve, since China will no longer be able to increase the volume of purchases of agricultural products. Some opinion polls already indicate the likelihood of Trump losing the election, so it is possible that he will lose his patience, and his administration will put forward the so-called America First Tax, Saxo Bank analysts say.
As expected, the introduction of this tax will lead to a decrease in the share of foreign products in the US market and stimulate the country's national production. A similar decision was already taken by the White House administration in 1930 to support the economy during the Great Depression. Then the US trading partners began to impose retaliatory restrictions or completely ceased cooperation with Washington. In the end, American companies lost consumers abroad, and the situation in the economy only worsened.
According to Stein Jacobsen, a similar development could happen in 2020, and the United States runs the risk of facing a recession again.
“A recession in the US is very likely. In the fourth quarter of 2019, the country's GDP growth is already about 0.2-0.3% and may even become negative. At the beginning of 2020, the country will be very close to this. A clear signal of the onset of the economic downturn was the situation with the yield curve (change in interest rates on debt securities. - RT ), which predicts a recession with a probability of seven out of eight, ”Jacobsen noted.
In the spring of 2019, the yield on government bonds of the United States with a maturity of ten years was lower than that of government securities with a maturity of three months. Traditionally, this trend usually develops shortly before the recession in the economy and last occurred in 2007.
Competitor to the dollar
In 2020, the Asian Infrastructure Investment Bank (AIIB) may announce the creation of a new reserve currency as opposed to the dollar. According to Saxo Bank analysts, Asian economies will conclude an agreement on the transfer of all regional trade to a new currency. Moreover, later Russia and OPEC countries may join the agreement.
“Over the past ten years, and especially clearly in recent years, more and more countries are striving to reduce their dependence on the dollar. In conditions when trade wars are still ongoing, and Russia and China are selling dollar reserves, Asian partners, including Moscow, have a certain need to create a new system of interstate settlements without a dollar, ”Jacobsen noted.
According to the expert, the transition of the largest players in world trade to settlements in the new currency can weaken the global dollar exchange rate by 20%. Moreover, in 2020, the US national currency risks falling by almost 30% against gold. As a result, the cost of precious metals can grow to $ 2,000 per troy ounce.
- Steen Jacobsen on reducing the share of the dollar in world reserves
Amid growing uncertainty around Brexit, the EU risks losing Hungary as well. According to Saxo Bank experts, after 15 years of membership in the EU, Budapest may declare its withdrawal from the association in 2020.
Economists explain their assessment of the sharp deterioration in relations between Brussels and the Hungarian government. So, back in 2018, EU authorities launched a penalty procedure under Article 7 of the Lisbon Treaty. As one of the sanctions measures, Hungary may lose its voting rights in the Council of the European Union.
“The EU refers to the increasingly stringent restrictions imposed on the freedom and independence of the press, the court, science, minorities and human rights defenders. The Hungarian leadership replies that the country is only defending itself - in the first place it is protecting its culture from mass migration. The current state of affairs remains unstable, and in 2020, as the procedure for Article 7 moves slowly through the EU bureaucratic system, it will become even more difficult for the parties to agree, ”Saxo Bank analysts say.
- The meeting of the European Parliament
- © Vincent Kessler / Reuters
According to Budapest, by their actions the European authorities are trying to punish Hungary for refusing to accept migrants. This was previously stated by the Minister of Foreign Affairs of the country Peter Siyyarto.
According to the forecast of Saxo Bank, Budapest will not make concessions to Brussels and, as an alternative to the European Union, will more actively build up economic ties with Turkey. However, such a position could lead to a reduction in European tranches and provoke panic in the financial market of Hungary. As a result, the country's national currency against the euro risks falling by 12%.