The big shortcoming: A grumpy 2020 for global growth

PARIS -- US political clouds coupled with wider climate and digital transformations point to a tricky 2020 for the world economy, although experts say a lurch back to crisis is improbable.

The Organisation for Economic Cooperation and Development said last month that activity had been hobbled by weaker trade and investment in the past two years, as US President Donald Trump pursued a trade war with China.

The OECD expects global growth to dip in the coming year to 2.9 percent, its lowest level since the world recession of 2009.

Trump appears to have struck a truce with China for now, under a "phase one" pact announced this month, but pre-existing tariffs remain in place and it will take time to demobilize their effects.

More broadly, the OECD contrasted proactive actions taken by central banks with the policy foot-dragging by governments in the face of climate change and the march of technology.

Industrialists and investors are having to correct their climate strategies even as Trump sits firm in his policy of denial. Oil giant Saudi Aramco recently had to trim back the volume of its gigantic share offering.

The International Monetary Fund was a little more optimistic in its latest World Economic Outlook, forecasting 2020 growth of 3.4 percent but warning nevertheless of a "synchronized slowdown and uncertain recovery".

At a time of populism and protests around the world, politics will remain an economic wild card next year.

Trump heads into the November presidential election under an impeachment cloud, and Britain's Brexit divorce from the European Union will likely be sealed next month, following Prime Minister Boris Johnson's election triumph.

The rise of technological giants sitting on mountains of data is meanwhile challenging the distribution of wealth between governments and big business, and has the potential to reshape the world of work as artificial intelligence exploits that data.

The online arena has emerged as another front for Trump's trade wars, after he threatened tariffs on France over its digital tax imposed on the likes of Amazon, Facebook and Google. Europe is threatening a collective response.

BETWEEN HEAVEN AND HELL

Ludovic Subran, chief economist of German insurance giant Allianz, sees a global "purgatory of growth" coming up.

Any systemic shock next year "will probably not be born in finance, but will be exogenous, for example a big regulatory shock on personal data, or in relation to the climate", he said.

If Trump survives the impeachment process and wins a second term, he could "double the bet against China" at the risk of military confrontation, Subran added.

Trump and his potential challengers on the Democratic left are united in their hostility to the free-trade and liberalization agendas that, they argue, hollowed out industrial America over the past decades. 

The mistrust is felt well beyond the United States.

"We're not worried about how to overcome a cyclical crisis, we know what to do," said Ingo Kuebler, the staff representative at Mahle, a German automotive supplier that has already been forced to downsize as car buyers turn away from diesel engines.

"The big issue is transformation, digitalization, electric mobility," he told AFP, fretting that an influx of cheap Chinese car batteries means "we are dreading the loss of many jobs".

THE BIG INCOME GAP

Since the financial crisis a decade ago, central bank policies have led to negative interest rates spreading in some countries, squeezing bank profitability and inflating private debt.

With growth faltering, the debate about wealth distribution will likely become still more acute. Anger at inequality runs like a thread through protest movements from rich Hong Kong to developing Chile.

In 2018, according to Oxfam, 26 billionaires had as much money as the poorest half of the world. 

"Even when people seem to enjoy basic material comfort, they may still experience the same level of misery and unhappiness as the poorest," French academic Esther Duflo said in October after she won the Nobel Prize in economics.

US investor Steve Eisman of "The Big Short" fame thinks that another global crisis is unlikely, but the best that can be hoped for is a slow strangulation of growth.

"What will happen next time, whenever it does happen, will be your normal garden variety of recession where the economy slows and goes negative and people lose money. That'll be painful enough," Eisman told AFP.

"A systemic crisis? Once was enough for our lifetimes," he said, reflecting back on the implosion of 2007-2008 that made hundreds of millions for his hedge fund when he correctly foretold the US subprime collapse. 

The prescient strategy of Eisman and other investment mavericks was recounted in a book by journalist Michael Lewis and subsequent Oscar-winning movie.

Agence France-Presse

World's richest families fret about geopolitics, climate change

LONDON - The world's richest families are worried about the US-China trade spat, Brexit, populism and climate change and are keeping more of their money in cash, according to a survey of family offices by the world's largest wealth manager.

Forty-two percent of family offices - set up to manage the wealth of one or more rich families - have increased their cash piles this year, according to the survey of 360 family offices by Swiss bank UBS and Campden Wealth Research.

Total cash reserves were 7.6 percent of family office investments in 2019, up 70 basis points from a year earlier.

Fifty-five percent of family office executives expect recession to begin by next year, 63 percent believe Brexit is negative for Britain as an investment destination in the long term and 84% think populism will not fade by next year.

"Family offices are taking a dim view of geopolitical events," Sara Ferrari, head of UBS’ Global Family Office Group, told Reuters.

Fifty-three percent of family offices see climate change as the single greatest threat to the world, with newer generations running the family money putting sustainable investing high on the agenda, the survey said.

Family offices' views did not necessarily differ from those of institutional investors - pension funds, insurers and sovereign wealth funds - or of the asset managers who help invest their money, Ferrari said.

But family offices had more flexibility in their investments, were less tied to specific benchmark indices and tended to invest more in illiquid long-term assets, she said.

Private equity was the second largest investment class in 2019 behind developed market equities. Family offices said they plan to focus more on private equity next year - buying stakes in unlisted companies or the funds which invest in those companies - with a particular interest in technology firms.

Direct private equity investment achieved the best returns for the families this year, at 16 percent.

The family offices overall had a return of 5.4 percent, based on different methodology from previous surveys, and compared with a 2.2 percent drop in the MSCI All Country World Index in the 12 months to May 2019.

The surveyed firms manage a total of $330 billion in assets.

source: news.abs-cbn.com

Blow for Macron as Le Pen tops EU election in France

PARIS -- The far-right National Rally party led by Marine Le Pen finished top in European elections in France, final results showed Monday, dealing a symbolic blow, but not a knock-out punch, to pro-EU President Emmanuel Macron.

Le Pen's National Rally (RN) received 23.31 percent of the vote, with Macron's centrist alliance trailing with 22.41 percent.

The two groups will have the same number of seats in the European Parliament, 23, after Britain's expected departure from the EU.

Le Pen, who lost out to Macron in a bitter presidential contest in 2017, called for the head of state to dissolve the parliament and call new elections, a proposal that was immediately rejected by the government.

"It is up to the president of the republic to draw conclusions, he who put his presidential credit on the line in this vote in making it a referendum on his policies and even his personality," Le Pen said in a brief speech late Sunday.

But despite triumphalist comments from RN figures, the final results were a mixed picture for the 50-year-old Le Pen: her party ended up losing ground since European elections in 2014 when it finished top with 24.9 percent.

In a first reaction after exit polls were released late on Sunday, an aide to Macron called them "respectable". Leading allies of the 41-year-old president sounded satisfied that the margin of defeat looked like it would be slender.

A second-place finish for the ruling Republic on the Move (LREM) party was a disappointment for Macron after he put his reputation on the line by campaigning, but it is a symbolic setback that aides said would have no bearing on his policies.

"The catastrophe that some people predicted for Macron has not taken place and the RN has a significant score, but not a spectacular one when you compare it to five years ago," analyst Zaki Laidi from the Cevipof political institute said.

'TIME FOR ACTION'

An aide to Macron, speaking to AFP on condition of anonymity, said that there would be "no change of line" and that he would intensify his planned reforms which include tax cuts for the middle classes and controversial changes to the pension and unemployment benefits system.

Prime Minister Edouard Philippe said the results confirmed the "redrawing" of French politics, which was evident in the presidential election in 2017 when France's traditional parties were eclipsed by Macron's new centrist movement and the far-right.

"The time is for action because the French people will judge us ultimately on one thing: results," Philippe said in a televised statement on Sunday.

He also said the government had "received a message about the ecological emergency" after France's main green party, EELV, looked set to finish third, with around 13 percent of the vote compared with 8.9 percent in 2014.

Macron had made no secret of the significance he attached to the results, telling regional French newspapers last week that the EU elections were the most important for four decades as the union faced an "existential threat".

He is a leading champion of further EU integration and is keen for further advances to link the economies, militaries and political systems of the bloc, which numbers 28 member states including Britain.

At home, the former investment banker started his 5-year term as an energetic pro-business reformer intent on cutting unemployment and making France more entrepreneurial.

But for 6 months he has faced so-called "yellow vest" protesters who have blocked roads and demonstrated to denounce him as a "president of the rich" who has ignored the plight of the working poor and rural France.

Macron has since announced major tax cuts for the middle classes and a rise in the minimum wage.

ALLIES?

His influence and Le Pen's in the European parliament will now depend on whether they can make alliances.

Le Pen has previously called for the formation of a "supergroup" of eurosceptic parties, but the hard-right ruling party in Poland -- PiS -- has shunned her because of her pro-Russian views, while Hungary's Prime Minister Viktor Orban remains aloof.

"The gains for our allies in Europe and the emergence of new forces across the continent... open the way for the formation of a powerful group in the European parliament," the RN's top campaigner, 23-year-old Jordan Bardella, told supporters on Sunday.

Macron meanwhile is in alliance with the ALDE centrist and liberal grouping which is seen as finishing third in the parliament behind the conservative PPE formation and the center-left Socialists and Democrats (S&D).

But the French president, who redrew French politics in 2017, is still hoping to forge a new broader alliance of pro-European which would bring together so-called "progressives."

"At the European level, the president is still maneuvering to form a large progressive alliance, a force that will be essential in the new parliament," an aide said on condition of anonymity.

source: news.abs-cbn.com

Obama blasts 'populist strongmen' in last UN address

Barack Obama used his farewell UN address Tuesday to castigate strongmen and populists, taking aim at Russia's Vladimir Putin and Donald Trump's rise at home.

Obama told the UN General Assembly that democracy was a better path toward prosperity than the "crude populism" that is mushrooming in the United States and around the world.

"Some argue the future favors the strong man," Obama said, in remarks sure to echo on the 2016 US campaign trail. "I believe this thinking is wrong."

"History shows that strong men are then left with two paths: Permanent crackdown, which sparks strife at home, or scapegoating enemies abroad, which can lead to war."

Obama's comments come amid a scorched-earth campaign to succeed him, which has seen a wave of popular support for Republican Party nominee Trump, who holds far-right stances on immigration and national security.

"Our country has been weak. We're letting people in by the thousands and tens of thousands," the businessman said Monday, attacking Obama.

Obama challenged that thinking in his address at the UN, saying: "We have to open our hearts and do more to help refugees who are desperate for a home."

"We have to imagine what it would be like for our family, for our children if the unspeakable happened to us."

Obama admitted, however, that a "course correction" was needed to smooth the serrated edges of globalization and neutralize "alternative visions" promoted by populists and zealots.

'Past glories'
He had a more direct message for his Russian counterpart, accusing Putin -- who has invaded Ukraine and deployed forces to Syria -- of trying using the military to gain global clout.

"In a world that left the age of empire behind, we see Russia attempting to recover lost glory through force," Obama said.

Even as a Syrian ceasefire brokered by Washington and Moscow lay in tatters, Obama insisted diplomacy -- not force -- is the only way to end the brutal five-year conflict.

"There's no ultimate military victory to be won, we're going to have to pursue the hard work of the diplomacy that aims to stop the violence and deliver aid to those in need," Obama said.

On Monday the Syrian military declared the ceasefire over and 18 UN aid trucks were destroyed as they tried to bring relief to war-ravaged citizens near Aleppo.

Syria and Russia denied striking the convoy, with Moscow suggesting it may have caught fire.

Legacy on the line

The Syria crisis, perhaps more than any other, threatens to sully Obama's eight-year effort to improve America's standing in the world.

Obama arrived at the White House in 2009 to find America's reputation tattered by the war in Iraq and George W. Bush's distain for global forums.

Obama has been more cautious -- critics would say timid -- with using US power, refusing to intervene to topple Syrian President Bashar al-Assad's regime.

Before the UN, Obama restated the case for multilateralism and an America that knows the limits of its own power.

"I've noticed as president times when both America's adversaries and some of our allies believe all problems were either caused by Washington or could be solved by Washington."

"Perhaps too many in Washington believe that as well," he said to laughs from delegates.

source: www.abs-cbnnews.com