Looking ahead to 2014

 
A man looks at a sign saying 14

One of the best economic forecasters once told me, the most accurate forecasters tell you what is happening today.

So, with great trepidation, I set out my 2014 predictions for the annual BBC Correspondents' Look Ahead programme.

So, if you're still reading (I appreciate the support), here goes…

My wild prediction for 2014

There are no ripples at all across global markets in the aftermath of the Fed "taper" where cheap cash injections are trimmed back and eventually ends probably next year.

Emerging economies in particular weather the departure of cash with nary a flutter.

Countries around the world heard the warning shot from Chairman Ben Bernanke back in May and prepared their economies accordingly for when it finally happened in December.

The so-called 'Fragile Five' of Brazil, India, Indonesia, South Africa, and Turkey have prepared for the inevitable end of the era of cheap money and adjusted well.

Plus, they each all have elections in 2014 that all proceed smoothly, and there are no surprises and only seamless successions.

What won't happen

Is that growth will go back to normal rates, incomes will rise strongly, and unemployed youth all find work. The process will be much more gradual.

Although it's been five long years since the recovery began, growth rates are still sub-par for post-crisis economies such as Britain and the US which were at the epicentre of the banking crisis.

As the US is the dominant economic engine, growth globally has also not picked up strongly. As such, firms find it hard to raise wages and job creation remains at a pace that is much slower than what it used to be.

For countries around the world reliant on the US export market, it doesn't help their young unemployed who are experiencing joblessness in double digits across the world, particularly in the Middle East and North Africa but also in Europe.

The real tragedy is if they are "scarred" in terms of employment prospects. A spell of unemployment can affect lifetime earnings.

A gradual recovery with lingering unemployment could experience what economists call "hysteresis," which is where the unemployed find their skills become obsolete and cannot re-enter the workforce.

We are all poorer for it, since productive people will be lost and growth will be permanently lower.

Name to watch

Angela Merkel. Elected for a 3rd term, she will call the shots on how the euro zone evolves with significant implications for the 10 non-euro EU countries such as Britain.

Many believe the ultimate shape of the euro zone will be dictated by the German Chancellor. She has retained in her government, Wolfgang Schaeuble as Finance Minister.

Called the "last European" since he was part of the start of the euro project, Schaeuble has said that the single currency will eventually become more; and even ultimately culminate in a directly elected President of Europe.

At present, it is a monetary union which is becoming a banking union. There are moves to make it a closer fiscal union and perhaps a political union… with that President of Europe.

But, if that were to happen, then the democratic deficit that many have highlighted will require a proper discussion about political legitimacy in the shape of a federal Europe.

Analogies are made with the United States, which took over a century to form its "more perfect union."

One litmus test that I have put to Europeans is to ask them where they are from. Usually, I am told "Germany," "France," "Greece."

Ask an American, and the reply is "America" — followed by which state. Until the answer changes from Europeans, then there is still some time yet before Europe heads down that road.

Coming back to Merkel, the euro zone decisions will depend greatly on Germany and the political will to sustain it. But as the euro evolves, the questions surrounding the powers and impact on non-euro countries that are in the EU will surely increase.

Hot spot to watch

China. Will President Xi Jinping and Premier Li Keqiang deliver?

Or will the expectations of comprehensive reforms backfire in that any disappointment becomes a trigger for protests amidst the background of slower growth?

China is almost a perennial choice as a place to watch.

The co-existence of economic reforms alongside lagging political change has long been a source of tension, particularly for the millions who have joined the new middle class and experienced the freedoms of the outside world.

The new Chinese leaders in March will set out for the first time their main legislative agenda.

Expectations are high for wide-ranging reforms, including coping with the rapid rise in debt and the shadow banking system.

The trouble is for high expectations is that when they disappoint, then the repercussions could be hard to predict.

My final prediction is that the global implications of a crisis in the world's second largest economy will be another Lehman.

BBC Correspondents' Look Ahead 2014 is on Radio 4 on Friday 3 January at 20:00 GMT and Saturday 4 January at 13:10 GMT; and on the World Service on Saturday 4 January at 19:06 GMT and Sunday 5 January at 12:06 GMT.

 
Linda Yueh Article written by Linda Yueh Linda Yueh Chief business correspondent

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  • rate this
    0

    Comment number 94.

    In 2007

    1£=14.5 Y
    1$=8.3 Y

    in 2013

    1£=9.6 Y
    1$=6.12Y

    in 2014

    Please the Chinese, hold it.....please

  • rate this
    0

    Comment number 93.

    91.treacle_01
    24 Minutes ago
    My 100% prediction for 2014 is that I retire on 30th June.

    Not sure of the impact on the global economy though!
    ~
    Well, best wishes from me for then. Hope it is a happy & healthy retirement.

  • rate this
    0

    Comment number 92.

    The other factor may the winter. It has been relatively mild so far but if it gets really cold for some weeks, we may have news headlines of people in serious trouble from cold & lack of food. If that in turn puts pressure on NHS A&E, we could see some desperate Coalition economic attempts to keep high ground over N.Labour.

  • rate this
    0

    Comment number 91.

    My 100% prediction for 2014 is that I retire on 30th June.

    Not sure of the impact on the global economy though!

  • rate this
    +1

    Comment number 90.

    We've seen how rattled Dave can get. May be more in 2014. GO seems cool & competent but limited in understanding of our problems & no vision for cure.

    One internal shock may produce panic that will affect economy: parties from outside the long-established 3 appearing to do well in the Euro elections. Add in 1 or 2 defectors from Tories and it may push some economic moves we weren't expecting.

  • rate this
    0

    Comment number 89.

    predicting 2014
    /
    "Life can only be understood backwards; but it must be lived forwards"

  • rate this
    -1

    Comment number 88.

    Linda, your prognostications are relying on a couple of things:

    That the banking cabal will continue to receive support until it can support itself from increased direct support. Both from the taxpayers - indirectly and directly.

    That economies not over infested with bankers continue to manufacture stuff from which the bankers can profit.

    Note a common thread here: The world is run for bankers

  • rate this
    +1

    Comment number 87.

    78FA "Europ/p."

    How can one treat baseless hatred equally with reasoned, rational and logical acceptance? Bigotry & xenophobia has had to be confronted through the ages. It is a very well established tenet of economics that isolationist trade wars harm everyone. After all one has to hate the devil & all his works. There is no, & can never be, philosophical equivalence between good & evil.

  • rate this
    +2

    Comment number 86.

    I predict we will all be told how well off we are and what a spiffing job George and Dave are doing.
    They will tell us the troubles are all caused by scroungers & or immigrants.

    Bankers, MP's and The Lords are all good chaps that deserve their pay.

    We will have to endure our problems for longer than they originally said because of Gordon Brown/The Unions/Someone else but definately not us.

  • rate this
    -3

    Comment number 85.

    83.SSaS

    8 -China's overnight rates when to 9% yesterday. They are doing the right thing (or rather letting it happen)

    It is not strictly a bubble as China's people are very big savers and have lots of cash to hand.

    C.F. the UK rates far to near zero - next to no savings and a mortgage driven property market.

    A blast of 5% would bring sanity to the UK property market - if not = banking crash!

  • rate this
    +2

    Comment number 84.

    Cameron & Osborne are looking as far as the next GE, so expect lots of fudged goodies. The facts are that the western world has colossal debts which will not just conveniently go away. Our whole method of living will need to be addressed sooner or more likely by default, later. The good days are over for The West. Best to be born middle class Chinese now, for the rosiest future. Zai hui in 2014.

  • rate this
    0

    Comment number 83.

    81 & 82 Contin.

    7) The ave. UK pension may increase 2.4% according to the Alan's figure
    8) The ave China state pension will increase 10% compared to 10% increase this year--- a huge complaints on this

  • rate this
    +1

    Comment number 82.

    81

    I meant 'I predict'

    5) The ave. UK property's price would increase further above the ave. inflation rate
    6) The China's property's price continue to increase (20-30% up this year, a 2/3-bed flat in Beijing is near to the price in London) -- the gov. would not be able to stop this

  • rate this
    0

    Comment number 81.

    I predicate

    1) The UK GDP per head won’t drop below the average EU level, alongside with spain (27), Cyprus (28) –IMF
    2) The ranking of the China’s GDP per head would keep up increasing from 87 (IMF2012) up to above 80- still a long way to go but rise rapidly.
    3) US would continue to restrain its QEs to avoid the devaluation of $ against Y
    4) China won’t devalue £ against Y

  • rate this
    +1

    Comment number 80.

    @78 FA
    Brilliant post! You are probably right on#3.

    Rather than Govt support one small sector, why not Govt make work&business&social life easier& better for all?

    Reduce cost of living & re-balance tax system. Everyone benefits, even those on higher incomes & with greater tradeable wealth who will have to pay more direct tax.

  • rate this
    -2

    Comment number 79.

    If Linda and the BBC read these comments then they must agree that most do not believe a recovery is under way. We have to ask them why they continue to broadcast only the positive half of the story.

    78.Fidius Albion. Freudian slip but very funny "BBC bog commenters".

  • rate this
    +3

    Comment number 78.

    What I'd like to see:

    1. UKgov does everything to support manufacturing, education & productive (engineering & knowledge based) services

    2. The Europhiles/phobes (from the top of Europe down to BBC bog commenters) stop treating their beliefs as religious principles & open up to the ideas of others

    3. West Brom to qualify for the Champions' League

    Sad to say that No. 3 is the most likely ...

  • rate this
    -1

    Comment number 77.

    What won't happen
    Is that growth will go back to normal rates, incomes will rise strongly, and unemployed youth all find work

    what about the ppl who are OVER 25. be nice if more was done to help ppl like that. im 1 of the lucky ones and have a job, but i know plenty who are out of work with no help to be found because they are "to old" for any help from the job center.

  • rate this
    0

    Comment number 76.

    > One litmus test that I have put to Europeans is to ask them where they are from. Usually, I am told "Germany," "France," "Greece."

    Rubbish. If an American asks a fellow American where they're from, they'll be answered "Virginia" or "Chicago" not "America".

    If you, Ms Yueh, a European, ask another European, you obviously get "Spain" or "Catalonia", "Britain" or "Scotland" rather then "Europe".

  • rate this
    0

    Comment number 75.

    2014

    Things will get worse.

 

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