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Events that will impact the economy in 2019

  • William De Vijlder Group Chief Economist BNP Paribas
  • Paris
  • 06.03.2019

Brexit, European elections, the US primaries... 2019 promises to be geopolitically intense and uncertain. How will these events impact the global economy? William De Vijlder, Group Chief Economist of BNP Paribas, shares his analysis.

How might the results of the European elections impact the global economy?

The European elections reflect the pulse of the electorate in the voting countries. The European model is no longer the two-party system, and the outcomes of the elections will signal whether the political fragmentation seen in some countries is taking hold throughout the Union. Some parties want "less Europe" while others advocate more. Environmental issues have also dominated the headlines recently and could influence voters' decisions. These elections are important. The European Parliament, along with the Council of Heads of State and the Commission, play a fundamental role in defining overall policy direction, including economic matters. The electoral results will allow us to assess whether voters' preferences and priorities in the various Member States are converging or not. Whatever the outcomes, major issues are at stake. Some countries have revealed their disagreement over immigration policies, national budgets, and strengthening the eurozone…

What can we expect from the United States as Donald Trump enters the third year of his Presidency?

In the United States, the 2020 elections will increasingly take centre stage, making forecasting the future more cloudy, complicated and risky. The wrestling match between the President and the Democrats could end up dominating the entire political landscape, driving the political parties to dig in their heals rather than make some concessions for the common good. The process of agreeing the 2020 budget may well crystallise debates, including the debate over the debt ceiling. For businesses, households and financial markets, the stakes are high.

All the while, the country's growth continues to slow. The Fed has also indicated that it will take sufficient time to assess the necessity of altering its monetary policy. This economic backdrop is likely to move to front and centre in the political debate and influence candidates' chances. Internationally the risk of a trade war with China seems to be diminishing and the probability of a trade agreement is looking stronger. 

Photo : William De Vijlder

What other major events do you anticipate? 

In the near term, two issues continue to dominate: the Sino-American negotiations, and Brexit. They are closely followed by the European elections, which will also concentrate minds. In the second half of the year, markets will also focus on changes in the composition of the ECB Board of Governors (a new President, among others) and the potential implications for monetary policy approach and communication. And then, come November 2019, there will be just one year left before the American elections.

This year will be full of changes, against the background of a slowing global economy. Recent months have been marked by increasing uncertainty, creating an unfavourable wind. In principle, this uncertainty should gradually dissipate. Hopefully, measures to support demand in China will bear fruit, and prudent management by central banks should support consumer and business confidence. The response is crucial for the global economy and particularly for Europe, the United States, and Japan.

This year will be full of changes, against the background of a slowing global economy.

How do you think this will impact financing?

The cautious tone adopted by the US Federal Reserve (Fed), one of careful vigilance, is reassuring but may end up being worrying: it suggests that the Fed has doubts whether the expansion which began in 2009 can continue. This may be the factor which, more than any other, characterises sentiment as we head into 2019: the feeling that we may be, little by little, nearing the end of a cycle. 

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