President of the European Central Bank, Mario Draghi, announced that it will cut its monthly asset purchases to ?60 billion from the current ?80 billion from April next year, during a press conference in Frankfurt, Thursday. Political uncertainties such as the election of Donald Trump and the resignation of Italian Prime Minister Matteo Renzi prompted most observers to predict quantitative easing would continue beyond its expiry date in March 2017. However, the European Central Bank said it would extend the programme to December 2017 and reduce bond-buying from ?80 billion (US$85 billion) to ?60 billion (US$65 billion) a month from April. European stock markets subsequently rose and bonds firmed.
EUROPE will remain divided, nationalism will rise and the US, Russia and China all face a testing 2017.
And while Islamic State will remain a weakened force, the world should be concerned as al-Qaeda has been quietly rebuilding itself and is set to be a much more active force next year.
These are just some of the predictions and forecasts for 2017 compiled by private intelligence firm Stratfor.
The organisation, which already successfully predicted Europe’s inability to cope with the financial crisis and the US-jihadi war, also warns Russia will continue to bolster its defences and create leverage across multiple areas in 2017, including in cyberspace and the Middle East.
Stratfor predicts China will take a more active role in bolstering its own economy by producing many of the things it once imported, which is set to have a flow-on effect to the global economy.
Nationalism is also set to increase across the world and this will be directly linked to economic issues.
“The longer economic pain persists, the stronger the political response,” Stratfor warns. The economic pain will affect Europe and the US, the “world’s only superpower”, the hardest.
Here’s what else Stratfor has predicted for the world in 2017.
THE US WILL PULL BACK
According to Stratfor, the global superpower isn’t feeling so super at all and is tired from overextending itself in the Islamic world and now wants to “get back to repairing things at home”.
The sense of retrenchment has already kicked in with US President-elect Donald Trump repeatedly warning he will back away from overseas obligations and get the rest of the world to do more across the globe.
But Mr Trump’s promise for the US to be less active in global affairs will be easier said than done, particularly where trade is concerned.
While revising trade relationships was possible two decades ago, it is less feasible now, given the “evolving global order where technological advancements in manufacturing are proceeding apace and where economies, large and small, have been tightly interlocked in global supply chains”.
Stratfor predicts that trade barriers are likely to be imposed on China and the rising trade spat between Washington and Beijing is likely to be felt globally.
The US will also pay for Mr Trump daring to question the One China policy.
“Beijing will pull its own trade and security levers that will inevitably draw the United States into the Pacific theatre,” Stratfor predicts.
AUSTRALIA WILL PLAY A BIGGER ROLE
Promoting regional trade and investment will remain a priority for Australia across the Asia Pacific in 2017, Stratfor predicts.
Australia will also ensure maritime security along vital trade routes.
However problems are set to arise closer to home and the country will “struggle to overcome growing political divisions and legislative gridlock”.
The country may also play a more active role in regional maritime security affairs, particularly in the South China Sea if tensions increase in 2017.
There is also likely to be a modest recovery in global commodity prices, which will be good news for exporters.
EUROPE WILL STRUGGLE MORE
According to Strarfor, countries across Europe face a critical year.
The European Union, which is already struggling with huge immigration levels and economic woes, will face further testing times in 2017.
Elections in the largest eurozone economies — Germany, France and Italy — are likely to “affect one another and threaten the very existence of the eurozone”.
Stratfor predicts the EU will dissolve, but not immediately.
“The question for 2017 is to what degree these elections expedite its dissolution,” Stratfor says.
“Whether moderates or extremists claim victory in 2017, Europe will still be hurtling toward a breakup into regional blocs.”
Meanwhile countries across eastern Europe are likely to unite in the face of increasing Russian expansion and uncertainty around US policy under a Trump administration, with Poland leading the charge.
RUSSIA WILL HAVE ROOM TO MOVE
A divided Europe will play to Russia’s advantage, giving Moscow room to consolidate its influence in its borderlands.
The Trump administration may ease sanctions and co-operate more in Syria as it tries to decrease the conflict with Moscow.
However this will be limited as Russia looks to increase its leverage particularly in cyberspace and the Middle East.
The US won’t be entirely happy with this and will want to contain Russia.
“Russia will continue to play spoiler and peacemaker in the Middle East to bargain with the West,” Stratfor warns.
“While a Syrian peace settlement will remain elusive, Russia will keep close to Tehran as US-Iran relations deteriorate.”
Moscow will also attempt to exploit divisions within the European Union, putting a strain on German-Russian relations.
MIDDLE EAST TENSIONS WILL RISE
Turkey and Iran will increasingly grow competitive, particularly in northern Syria and Iraq.
Turkey will be focused on growing its influence and containing Kurdish separatism as Iran looks to defend “its sphere of influence”.
While Islamic State grows weaker it remains a force to be reckoned with, and the ensuing military operations against it will have an unintended consequence.
The “scramble for territory, resources and influence will intensify among stakeholders” and the effects of a weakened IS will be felt elsewhere as insurgent and terror attacks are employed outside the Middle East.
“Military campaigns in Iraq and Syria will degrade the group as a conventional military force but will do little to degrade it as terrorist or insurgent force,” Stratfor warns, adding the group will exploit ethnic and sectarian divisions.
A weakened Islamic State is also likely to allow a still active al-Qaeda to grow.
“With the spotlight on Islamic State, al-Qaeda has also been quietly rebuilding itself in places such as North Africa and the Arabian Peninsula, and the group is likely to be more active in 2017,” Stratfor predicts.
CHINA WILL BE BUSY
It won’t just be the Asia-Pacific where China will be expanding its influence in 2017.
Beijing will seek closer ties in Moscow on energy projects, military co-operation and cyber technology.
China will remain a big player in the Asia-Pacific although its economy, which has been growing steady for three decades, will begin to protract. The country faces weakening growth in the economic sector.
Concerns will remain over the high levels of corporate debt.
Beijing also faces a threat from the Trump administration, with potential tariffs on Chinese goods, which will in turn increase tensions with Washington in the wake of Mr Trump’s Taiwan call controversy.
China, which raised global concerns over its claims to territory in the South China Sea, is predicted to adopt a more measured approach in 2017.
According to Stratfor, China “is now replacing a strategy of aggressive expansion with a strategy that, in addition to coercion, leaves some room for co-operation”.
GLOBAL ECONOMY WILL STRUGGLE
Inflation is set to return to global markets, causing “central banks to abandon unconventional policies and employ measures of monetary tightening”.
Government spending is also predicted to remain the primary engine of economic growth.
The US will tighten its monetary policy, which will “shake the global economy” in the early part of next year
Markets are also set to be more volatile with threats to the eurozone and trade disputes likely to make investors nervous and react dramatically.
Meanwhile the UK is likely to lose influence in protectionist Europe in terms of global trade initiatives.
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