ISA (International Strategic Analysis) is a leading provider of international market analysis, economic forecasting and country intelligence for many of the world's leading companies, organizations and governments.
ISA's range of international research reports and forecasts are utilized by these organizations to help them further their understanding of international markets and to allow them to have a single, consistent source of international information, data and analysis. In addition, ISA provides clients throughout the world with customized research support, allowing them to draw upon ISA's vast experience in international markets.
Executive Director Michael Weidokal shares his expertise on the biggest issues facing the global economy, including the key developments encouraging growth, political risks in emerging markets and the biggest events shaping global trade and investment in 2016.
Q1. What are the biggest events shaping global trade and investment in 2016? What impact have these events had and what else can we expect this year?
The most important issue facing domestic consumer spending. As China has reached middle income status, economic growth rates have fallen. China’s official rate of economic growth in H1 2016 was 6.7% (down from 14.2% in 2007), and its actual rate of economic growth was likely somewhere between 4.0% and 4.5%. We are not predicting a hard landing for China, but a return to double digit growth is out of the question. On the positive side, 6.7% GDP growth in China today contributes more to global economic growth than the 14.2% growth did in 2007, thanks to the expanding size of the Chinese economy.
The other key issue worth mentioning here is the rise of populism and protectionism in many of the world’s leading economies. Whether it is the rise of Donald Trump in the US, Brexit or the growing support for far-right and far-left political parties in Europe, protectionism is emerging as a major threat to international trade and investment. Already, major trade deals such as the TTP and the TTIP are in jeopardy due to growing support for protectionism and isolationism. With the global economic growth forecast to remain sluggish, and with whole sections of the population in developed economies being left behind by economic and technological changes, populism could be here to stay.
Q2. What countries / regions do you expect to experience the biggest economic growth over the next five years? What are the key developments encouraging growth?
The fastest-growing economies in the world will be found primarily in South Asia, as most of the world’s other emerging regions will continue to struggle to record strong growth. India will remain the fastest growing large economy in the world, with growth rates above 7% in the coming years. China, despite its slowdown, will continue to outpace most other developed economies, while Southeast Asia will be home to a number of the world’s best-performing economies in the coming years. Growth will be driven by access to the huge Chinese market, high levels of export competitiveness and continued regional economic connectivity.
Q3. What are the major near-term and long-term political risks in leading emerging markets? Which markets face the biggest risks and how are they responding?
India faces high levels of internal and external political risks. Internally, the country’s deep political, religious and ethnic divisions will hamper growth by making it difficult for the government of Prime Minister Narendra Modi to enact reforms aimed at boosting the country’s economic competitiveness and attracting more foreign investment. Externally, India is in a very dangerous neighborhood and its rivalry with Pakistan remains one of the world’s most dangerous flashpoints.
China’s main political risks stem from the tensions it has with many of its neighbors, and with the Russia’s political risks are also high, particularly as the conflict in Ukraine remains unresolved and Russia’s relations with the West are so poor at the moment. Latin America faces high levels of crime and corruption, and this is hindering that region’s ability to pull out of its recent deep downturn.
Q4. What are the key demographic trends set to influence global trade during the next ten years? What factors are influencing these trends and how will market participants react?
Population growth is slowing in most of the world’s leading economies. “Old World” developed economies such as Europe and Japan are facing major demographic declines that are seeing working-age populations decline precipitously in countries such as Japan, Germany and Italy. Even “New World” developed economies have seen birth rates fall in recent years, reducing their potential for growth.
In emerging markets, population growth is slowing rapidly in China and most of Southeast Asia, as well as in Latin America. This will raise labor costs in these countries, while presenting these countries with the problem of how to deal with rapidly-aging populations.
Q5. What other industry do you find the most interesting outside of the ones you cover? Have you ever considered covering this industry?
The global sports industry is one that has always interested me. I have had the good fortune of working closely with sports organizations such as the NBA and UEFA. I have personally worked on projects supporting the NBA’s increasing presence in international markets, while ISA provided the background research for UEFA’s site selection for the past two European football championships (Poland-Ukraine in 2012 and France in 2016).
Michael’s answers provide us with a number of revealing insights. These include the ongoing transformation of China’s economy, the high levels of internal and external political risks in India and the growth potential of fast-growing economies in East and South Asia.
Interestingly, he also lists Donald Trump’s presidential campaign and the Brexit referendum as signs that protectionism is emerging as a major threat to international trade and investment. This was a topic we covered earlier this week, when a new report from the Global Trade Alert (GTA) showed the slowdown in world trade has been much worse than previously estimated, and highlighted the rise in protectionist measures as a key factor.
We’d like to take this opportunity to thank Michael for answering our questions and offering his expertise on this area.
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About the Analyst:
Michael Weidokal is the editor and chief researcher for many of ISA's best-selling publications, including ISA's Country Reports, Region Reports and the ISA Global Update, ISA's weekly electronic newsletter covering key international political, economic and business issues and events. In addition, Mr. Weidokal is a leading contributor to ISA's international economic forecasts as well as ISA's risk forecasting activities. Mr. Weidokal has also written a large variety of articles and studies in the fields of trade, investment and international affairs.