January 22, 2014
At the beginning of every year we are trying to make predictions for the year to come. Some of them happen, others don’t. However, if we look at the facts (Sherlock Holmes’ famous quote) we can draw at least a clear conclusion – the year 2014 will definitely be a very challenging one.
First of all, if we look in our own backyard we know there are going to be two important elections (a presidential one and another for the European Parliament). We can say that in 2014 Romania will set its road for a long period. The confusion floats together with the outside fog. It will be interesting to see if Romanians will find their strength to move towards a major project for Romania. After all, 2014 is a historic year and deserves special attention.
The European Union is at a standstill
Europe is not going through its best moments. Even though things have settled a bit, by giving up to an austerity policy and exceeding a sovereign debt era, the danger is still here. Elections for the European Parliament will also take place and the major positions of the European construct will be reseted. From a political point of view, 2014 will be a year of stagnation, and from an economic one, as current statistics show, still a stagnation year. Although the systemic risk was substantially reduced, the economic growth will be elusive. An increase in demand is necessary in order to stimulate the economic growth, an austerity loosening and a lending boost, especially to SMEs.
Finally, the 2014 economic growth in Europe, in the euro area, will remain insufficient to reduce the high level of unemployment. The unemployment theme, especially among the youngsters, will be included in the electoral campaign speech and the European leaders will find it difficult to come together in order to build something in a year of major leadership change. There will certainly be promises!
The challenge Europe is facing is a major one – governments must regain their citizens, they must maintain a minimum market confidence in the reform process and they must find consensus and support for faster advancing towards a deeper economic and political union. Maybe some of these will be resolved and thus the possibility of a crisis recurrence can be eliminated.
The United States can strengthen its economy
The USA seems to recover a little in 2014 due to emerging markets growth and low-cost shale gas. The growth potential on long-term remains even more uncertain, since the governmental brake will still limit the public sector investment.
The President Obama’s strategy to strengthen the middle class has the potential to sustain and increase the productivity, and the decreasing dependence of banks and promoting their responsibility will strengthen the American economy. Moreover, there will also be a real estate recovery if the unemployment rate will decrease and buyers’ confidence and income will increase.
China adopts a bold strategy
China will also face a year full of challenges and changes. In late November, the Third Plenum of the Central Committee of the Chinese Communist Party has developed a bold policy framework in order to achieve sustainable growth. What prompted China to adopt such an approach is precisely the fact that it remained without its “fuel” and its 7% economic growth was on the edge of collapse. So, the Third Plenum paid special attention to the Chinese outward enlargement, especially in Europe, and to strengthening the tax system, helping the local authorities to no longer rely on bank loans for financing their basic needs.
Given that the global economy seems to go on a post-crisis model during 2014 – this can mean relatively high growth in emerging economies, slow growth or even stagnation in Europe and a modest increase in U.S. economy – China strengthens its position within, but also abroad. It sill remains a powerful force with a rythm that cannot be neglected.
The emerging countries experience a full year of testing
The emerging countries led by Latin America will experience a full year of testing. The abundant capital inflows will have to be better managed and is necessary to adjust the consumption, investment and public spending growth rates. The year 2014 carries, in the light of any state or region we look, the productivity growth footprint in order to ensure a sustainable growth.
The implementation of corrective measures in emerging economies is likely to slow growth in 2014 , but they will return to a higher growth in the long term.
The African countries remain on the same trend and their 2014 success will depend on the prices of natural resources.
The Russian Federation and the chessboard
The Russian Federation will still be caught by its ambition to strengthen the international scene. Certainly, the economic aspect is important, but is treated as an instrument in achieving the ‘putinist’ goal of Russia as a great power. The 2013 latest moves on the chess board revealed a strong game launched by the Russian Federation for gathering points for its strategy. Definitely Russia will move some pieces in 2014, maybe not as concrete as in 2013.
Middle East does not surprise us because he is always surprising!
A notable event that can influence the international policy in the region is the presidential election to be held in Turkey in August, “seasoned” with local and provincial elections in March. The current Prime Minister has announced his candidacy for the presidential election, although the president has a rather ceremonial role, but the Constitution still hasn’t been changed in his favor.
Every year has its stages and comes with many events and many changes of circumstances, but in a broader perspective, all these shape a reality that underlies a future decided today. All these deserve more attention. Romania needs to better anchor in this reality, just as anyone has to work on this. The year 2014 is a difficult task, but in the end it could be a win. We’ll see!