Three Questions for 2016
By Isaac Cohen*
The New Year is starting cloudy and at least three equally relevant factors are raising questions which will require monitoring throughout the year.
The Chinese economy is undergoing a transition which is generating volatility in exchange rates and world markets. The fall of 7 percent in China’s stock markets, on the first Monday of the year, led to a rout in world markets. In the United States, the Standard & Poor’s 500 Stock Index fell 6 percent, the worst starting week of any year of its history. Therefore, the question is if the Chinese economy will experience a hard or a soft landing.
The next question is how far oil prices will fall before reaching the bottom. Throughout 2015, overproduction, a strong dollar and slow demand pushed down oil prices. So far this year, the fall continued and prices are already under $30 per barrel. This is close to the $20 per barrel forecast supposedly necessary to persuade major producers to cut production and reduce the glut.
Finally, the last question is what the Federal Reserve will do with interest rates in the United States. As the only advanced economy that is growing moderately, the question is if the US economy can continue growing despite the global slowdown.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.