Forward Agenda - June 2018
Will Italian political volatility spark a new crisis for Europe and the euro? Image: REUTERS/Alessandro Bianchi - RC1A283E0840
Grüezi mitenand! Welcome to the World Economic Forum’s NEW monthly update - the Forward Agenda. Building on the success of the Agenda Weekly, each month we pull together the most relevant and insightful points on the global agenda and publish them here.
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Europe’s institutions get a stress-test: Italy’s populist parties pose a challenge as they form a government that looks to test relationships with Brussels, Berlin and the European Central Bank. If the Italian bond market collapses will the ECB be able to do what it takes? The fall of Mariano Rajoy in Spain, philosophical fissures between France and Germany, and European weakness in the face of aggressive US policies on trade and Iran add to the sense of peril.
- Watch: the slowdown in European growth seen in 1Q … and turmoil in Italian bond markets. Could Italian mini-BoTs be a step to the € #EUscIta? For Brexit negotiations, the devil’s in the lack of detail.
- Forward view: the European Union faces a breakaway Britain, a sceptical south, an authoritarian east and trade challenges from its traditional Atlantic ally, the United States. Meeting those challenges might be just what’s needed to make Europe stronger.
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In hock: The US budget deficit is ballooning, estimated to go from 78% of GDP now to some 98% in 2028. This, combined with fiscal strains elsewhere – Europe’s deficit is 88% of GDP, China’s 48% – is putting huge strains on the stability of the financial markets. When combined with turmoil in the euro area and challenges facing the global trading system, commentators are talking about risk of a major financial crisis.
- Forward view: the global financial governance system is weaker than it was a decade ago when the global financial crisis hit, and sovereign debt is higher. The elephant in the room, however, is the grossly under-reported global pension gap, which at current rates will run to hundreds of trillions of dollars by 2050.
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Nuclear-grade persuasion: On-again-off again talks between President Trump and Supreme Leader Kim are more likely than not to be on in Singapore, June 12. In the event that a negotiated agreement is reached for North Korea to denuclearize, it will take a long time.
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New rules for the great game: As renewable energy accelerates in tandem with the spread of digital devices, strategic metals such as cobalt and lithium are shaping a new industrial landscape. Meanwhile, the drive for minerals is putting pressure on the governance of Antarctica, a continent with no government only a brittle Cold War-era treaty between 53 countries.
- Watch: the changing dynamics of a world where oil competes with rare earth elements for geo-strategic importance. Perhaps the greatest value commodity in the world of the Fourth Industrial Revolution is data. GDPR is one of the new types of trade and protectionism springing up to create competitive advantage.
- Forward view: one of the greatest unknowns surrounding the rise of autonomous mobility is the human and environmental impact it will have.
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The beautiful game: Organisers are hoping the Soccer World Cup won’t become a political football when it kicks off in Russia on June 14.
- Watch: 3.2 billion people did in 2012, with 1 billion tuning in for the final alone. Selling sponsorship to the Russian tournament has been more difficult than Brazil 2012 as business struggles with brand risk against a background of Russian geopolitics.
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Trade shifts: First shots in a trade war were fired on the last day in May as President Trump allowed exemptions for metals tariffs for Europe and other allies to lapse. Trade patterns will shift more quickly as countries fight back, even in the event that the Trump administration’s aggressive negotiation style softens.
- Watch: for further challenges to threaten our rules-based international trading system.
- Forward view: the biggest losers from protectionism are workers and consumers. Long-term, globalization-driven inequality will only be addressed through adequate safety nets alongside policies that promote competitiveness and innovation.
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No baby boom: China is considering lifting all restrictions on the number of children a family can have. A change in the 40-year old policy is unlikely to have a radical impact on the country’s demographic pyramid in the short term, birth rates in other countries are trending downwards, likely to be mirrored in China as the country gets wealthier.
- Forward view: falling child populations can bring debilitating societal and economic impacts. One way to mitigate this threat is to encourage and empower more women to participate in the labour force.
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Saudi Arabia is about to launch a massive new market for automobiles: the Kingdom’s women. Just in time for the self-drive revolution, women will get behind the wheel legally for the first time from June 24. The change is part of a national package of reform that includes new forms of entertainment, employment and economic activity for national renewal by 2030.
- Forward view: over the past ten years, Saudi Arabia has been among the most improved economies in the Forum’s Global Gender Gap Report. However, at 138th in our Index, it still has a mountain to climb.
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South Africa rising: the Forum will convene a Strategic Dialogue on the future of South Africa in Johannesburg on June 28. Participating alongside the country’s President, Cyril Ramaphosa and a team of ministers will be top leaders from some of the world’s largest corporations.
- Watch: For the country’s strategy for luring back foreign investment.
- Forward view: Restoring South Africa’s economic competitiveness to a positive long-term trajectory calls for further reforms, including an overhaul of its institutions and a fresh look at both education and skills. One of its weakest areas, according to the Global Competitiveness Report 2017-18, were in fact its financial and goods market efficiency: previous areas of excellence for the country.
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