5 factors that could endanger world economy progress
Investors still unsure what is the driving force behind the growth
- Emerging markets show weakness and speed of expansion is reduced
- Developed economies still slowing down despite recovery
- Central banks and Federal Reserve especially vigilant about the market
The strength of the global economy has been called into question in recent times, and there are many economists who warn of turbulence that could affect growth in developed and emerging markets.
The scenario is complex from the point of view of economic and political standpoints. Raw materials, the fragile recovery in Europe, the different electoral events and policies of the central banks are worrying investors and economists. These are the five main factors to be taken into account:
1. Deceleration in China
The Chinese economy has grown for the first time in nearly three decades at a rate lower than 7%. The slowdown in the growth of the Asian giant, the world's second largest economy, is clear but not so much as to how much it can be reduced.
The Chinese economy has grown for the first time in nearly three decades at a rate lower than 7%
"The real challenge is to accelerate the pace of structural reforms that China needs to put in practice for moving toward a model based on consumption and in services," says S&P.
The rating agency maintains its forecasts for GDP growth in China at 6.3% for 2016 and 6.1% for 2017, despite the fact that the Asian country continues to dominate the discussions on the future economic and financial circumstances of the Asian market.
2. Instability in the oil market
Oil is listed with slight gains by the barrel in West Texas, United States, and Brent,Europe, which is well above $50. However, it has demonstrated extreme volatility. Since arriving at $100 in 2014, it lost $30 of value in February of this year.
The OPEC group meet on Thursday and sparks could fly between Saudi Arabia, Russia and Iran as they compete for market share, which could increase the precariousness even further.
3. What if the Fed is wrong?
"The economy continues to improve and the growth seems to be rebounding compared to the first quarter. If the labour market continues to improve, as I hope, it would be appropriate for the Federal Reserve to continue to raise interest rates and probably in the next few months, this will happen," said Friday Janet Yellen, president of the Fed during a public intervention in the University of Harvard.
The United States central bank meets on the 14th and 15th June, and the federal funds rate has been anchored in the range between 0.25% and 0.5% since December, when the institution presided over by Yellen rose for the first time in nine years.
What if the rises are detrimental to the economic recovery? For now, what we know is that the U.S. GDP grew 0.5% in the first quarter, one tenth less than expected and below the average of the past six years.
What if the rises are detrimental to the economic recovery?
4. Will Brexit come to pass?
On 23rd June the British people will decide at the ballot box if they want their country to continue in the European Union or not. The Prime Minister, David Cameron, has campaigned against Brexit, believing that it would be "self-destruction", while the Bank of England has predicted a loss of up to one million jobs, a weakening of the pound and a rise in inflation.
5. Weakness in the eurozone
Recovery in the euro area is not as strong as the European authorities would like to imagine. In addition, inflation has been for May is around -0.1%, with which it remains a second month in negative percentages, despite the efforts of the European Central Bank encouraging expansionary monetary policies.
Unemployment statistics do provide optimism. Unemployment has fallen in the eurozone to its lowest figure since August 2011, to stand at 10.2% in April, according to data from the Statistical Office of the European Communities (Eurostat).
