The coming 2015 year will prove to be a very important twelve months for the world economy. There are large issues still at play that could bring either forceful restoration or another global recession. Guardian News and Media published an article explaining the five main topics that could either make-or-break the world economy in the current year.
The first issue is in regards to Russia and Ukraine. With the plunge in the ruble in the weeks leading up to the end of the 2014 year, the central bank predicted a fall in output of 4.5%. This could lead Russia back down a path to recession. The depth of this potential fall will be determined by what happens with the price of oil and if sanctions, imposed on Russia by the west, will be lightened or even lifted. What happens in Russia could have a domino effect onto other neighboring countries and the eurozone.
Oil is the second of the five issues for the 2015 world economy. It was a huge topic towards the end of 2014, with the price of a barrel of oil dropping to nearly half the price it was during the middle of 2014. Thus far, the drop in oil prices has caused an increase in consumer spending and growth for economies. Check out other blog posts on globalEDGE related to the drop in oil prices.
China is number three, with growth expected to be lower in 2015. This decline in growth could affect the rest of the world in two big ways. First, exports to China from countries such as Germany and Australia will weaken. This could have a substantial impact on all economies involved, as Germany supplies China with industrial machinery and Australia supplies China with raw materials. Second, China will end up exporting deflation to the rest of the world, as export prices continue to drop.
The fourth issue involves the United States. In 2015, an increase in interest rates is likely, which generally leads to market volatility. With the first potential interest rate increase since the great recession, we will see repercussions around the world. Until the increase actually happens, there will be great uncertainty within global markets
The fifth and last issue is in regards to the eurozone. With a scare of deflation moving from Spain and Greece to the other parts of the region, it is suspected that consumers may halt spending and wait for prices to fall even farther. The last option for the eurozone now may be quantitative easing. With Germany being resistant to this option, the eurozone has yet to put it into action. The longer quantitative easing is put off the more apprehension will build.
In the new year, these five pressing issues will take a turn one way or the other, having a grand impact on the world economy. Check back to the globalEDGE blog this year to stay up to date on issues in the global economy and other international business topics.