A New Year beckons and the Financial Times once more indulges in the ritual of forecasting the 12 months ahead. Our experts and commentators set caution to one side and predict what will happen in everything from the US presidential election to the Euro 2016 football tournament.
A quick judgment on how they did last year. Ed Crooks correctly forecast that the oil price had further to fall, a brave claim at the end of a year in which it had already halved. Martin Wolf said the ECB would adopt full quantitative easing, which it did. Clive Cookson rightly opined that Ebola would be eliminated in west Africa by the close of 2015. Gideon Rachman said Vladimir Putin would annexe no further territory in Ukraine and Europe. Not many at the end of 2014 were saying that.
We got one wrong. Jonathan Ford was among many who assumed the British general election would end in a hung parliament (he went so far as to predict a national government). Otherwise, the fault last year lay not with the answers we gave but the questions we failed to ask. We did not foresee a surge of Isis-sponsored terrorism in France; that Russia would take military action in Syria; and that the migrant crisis would become a grave threat to the EU. In 2016 too, events will happen that are as yet beyond our imagination.
Will Hillary Clinton win the US presidential election?
Yes. It will be a rollercoaster election — and the nastiest in memory. Mrs Clinton will be pilloried by her Republican opponent, Ted Cruz, for her character flaws and weaknesses in the face of America’s enemies. A large chunk of the electorate will hold up the Clinton name as an emblem of all that is wrong — and corrupt — about today’s America. But elections are still won in the centre, or what is left of it, and Mr Cruz will be too far to the right of the median voter to make it to the White House. Despite uncomfortably close polls, Mrs Clinton will win the electoral college by a landslide. Democrats will take back the Senate. But she will start her term in a very polarised Washington. There will be no honeymoon.
Will Britain leave the EU in the referendum expected in 2016?
Britain’s EU referendum
David Cameron is under pressure from all sides and faces a delicate balancing act in attempting to renegotiate an acceptable UK membership settlement with the EU
No. Britain will vote to stay in the European Union. Not with any sense of enthusiasm or excitement but because the innate common sense of British voters ultimately will prevail. Forget the technical arguments about whether David Cameron manages to secure a good deal in his renegotiation or whether the UK gets back its contribution to Brussels in increased investment and trade. Consider instead the protagonists on both sides. In the end voters will choose between the calm logic of former prime minister John Major and the populism of Ukip’s Nigel Farage. My money is on Mr Major. If I am wrong, Britain faces truly turbulent times.
Will Bashar al-Assad still be in power 12 months from now?
Yes. Assad will remain nominally president of Syria in 2016, even if in reality he has already been reduced to the status of the biggest warlord rather than the ruler of a state. Militarily, he has been bolstered by the Russian military intervention that has targeted his rebel enemies. Politically, a US-Russian plan agreed in recent weeks envisages an 18-month transition and is fraught with risks. Even in the event that a peace process gains traction, Mr Assad will do his best to stall and hold on to his seat of power in Damascus.
Will the Bank of England finally raise interest rates next year?
No. The Bank of England will flirt with rate rises through much of 2016, it will tease, but in the end it will not put its money where its mouth is. It has good reasons to avoid a decision. Inflation will lift off from zero very slowly, wage growth is weak; oil prices are weaker; and deficit reduction will prevent a boom. The BoE is keen to try its new powers to limit credit first before thinking about interest rates. The consequences of a spell of higher than target inflation are also limited. Later in the year, the BoE might decide to act, but even if it did, it would not make much difference. As far as interest rates are concerned, Britain is in what governor Mark Carney says is a “low for long” world for some time longer than 2016.
Will at least one member of the group of 20 leading economies request an IMF assistance programme in 2016?
Yes. Within the G20, no developed member will need a rescue. The only conceivable candidate is Italy, given its high public debt. But the European Central Bank’s support, including quantitative easing, protects it.
The G20 also contains 10 emerging economies. Some are being buffeted by sharp falls in commodity prices (Argentina, Russia and Saudi Arabia are prime examples). Some run significant current account deficits (Saudi Arabia again springs to mind, along with Brazil and South Africa). Both India and South Africa have fairly large fiscal deficits. Others, such as Brazil, have a smaller deficit but a sizeable burden of public debt. The countries that tick all the boxes for instability are Argentina, South Africa and Brazil. Under stress, those countries have recently changed finance ministers. Argentina has a new government that promises a new approach. The IMF stands ready. Will at least one of these countries call upon it? It seems likely.
Will Brazil’s Dilma Rousseff be impeached before the Olympic Games begin in Rio?
No. But it will be a close-run thing. For now, Ms Rousseff probably has enough support in Congress to stop the process. But the more time passes, the worse the country’s recession and the weaker her political support becomes. Impeachment proceedings, even if the House of Representatives votes for them to go ahead, will probably only begin on February 10. Assuming the process’s complex sequencing then takes its full 180 days, Ms Rousseff could be impeached in mid-August. That would be after the Olympics officially starts on August 5 — phew — but, still in time for the high-jump final on August 16.
John Paul Rathbone
Will Angela Merkel still be German chancellor at the end of the year?
No. Although 2015 ended with Ms Merkel receiving a standing ovation at the conference of her ruling Christian Democratic Party (CDU), 2016 is likely to see the end of her long reign as chancellor. That ovation looked like conclusive proof that her job is safe — despite the pressures caused by the arrival of about 1m refugees in Germany in 2015. But Ms Merkel has now promised to reduce refugee flows next year. This is likely to prove undeliverable as desperate migrants, aided by people smugglers, continue to flow in.
Admiration for the chancellor’s courage and moral leadership will give way to uncertainty and discontent. The cracking point could be a revolt from local governments, who pronounce themselves unable to cope with the numbers. That, in turn, would finally provoke a challenge to the chancellor from within the CDU, making her position untenable.
Who will win the Euro 2016 football tournament?
Belgium, the best team in the world, according to recent Fifa rankings. That arcane coefficient overstates Belgium’s quality, but not by an exorbitant margin. Through an advanced system of scouting and coaching — and a liberal naturalisation policy for immigrants — this small nation under a rickety state has produced a torrent of elite players. Belgium can field an attacking trio of Eden Hazard, Kevin de Bruyne and Romelu Lukaku, Premier League stars whose combined market value would touch £150m. The German squad is more seasoned, Spain’s more cohesive, but Belgium lacks little in sheer technical quality. With France playing host, there is also something akin to home advantage.
Will China devalue the Renminbi significantly next year?
China has been roiling global markets all summer as its authoritarian leaders try to stop a huge stock bubble from bursting and its slowing economy from stalling
Yes. China has good reasons to want to keep the renminbi stable against the US dollar in 2016 — a strong merchandise trade surplus, massive foreign exchange reserves and a desire to show the world that the “redback” is a worthy reserve currency. But the renminbi is still likely to depreciate to about Rmb7 to the US dollar, down from about Rmb6.48 currently. The flagging Chinese economy is likely to need at least two interest rate cuts next year while the US dollar is supported by continued Fed tightening. That should keep capital outflows from China at a high level, putting downward pressure on the currency. The renminbi’s trajectory is unlikely to be smooth. This may well be the most volatile year ever for the Chinese currency.
Will Jeremy Corbyn still lead Britain’s Labour party a year from now?
Yes, and for several reasons. The first is that a majority of the party, if not its MPs, want him to. Despite Labour’s weak showing in the opinion polls, the rank-and-file seem happy with the direction the party is taking. Then, there is the congenital loyalty of Labour MPs. Unlike the Tories, the party has never excelled at assassinations. And in any case if, as now seems likely, Mr Corbyn tweaks the party’s unclear leadership election rules to ensure that the incumbent is on the ballot come what may, any challenge would be quixotic at best. It took the full rhetorical force of Ernest Bevin to hound Labour’s last pacifist leader, George Lansbury, into retirement in 1935 when the then union boss persuaded the party to stand up to fascism. Today’s Labour is still waiting for its Bevin. They seem unlikely to show up next year.
Will Abenomics fail in 2016?
No. The record of Abenomics is mixed, but on balance, it has done Japan’s economy more good than harm. That will continue in 2016. True, the central goal — to get inflation to 2 per cent — has been missed. Because of the oil price collapse, inflation, as normally measured, is still hovering around zero. Shinzo Abe’s government compounded the problem by prematurely raising consumption tax, taking money out of people’s pockets just when it wanted them to spend. Yet the broader reflationary goals of Abenomics are working. Stripped of energy prices, inflation is about 1 per cent. Public debt has stopped rising as a percentage of nominal output. Japan’s companies are making record profits. Mr Abe’s problem is that he has pledged to raise the consumption tax again in 2017. That is when the crunch could come.
Will Russian athletes compete in the 2016 Olympics?
Yes. There is no political will to punish Russia for resurrecting the mass doping of the Soviet era. Last month, it became the first country in history to be suspended indefinitely from athletic competition until it can prove it is clean. But Moscow and the west are keen to minimise the embarrassment of an independent report that listed some of the worst abuses the sport has seen. To compete in Rio, Russia will have to fire any officials that have been part of doping programmes, resolve all pending disciplinary cases, investigate its doping culture and demonstrate that it has changed its ways. The Russians say this will take three months.
Will sales of cars with diesel engines fall in Europe in 2016?
Volkswagen emissions scandal
The German carmaker is engulfed in the worst scandal in its 78-year history after it admitted to manipulating emissions test data on its diesel vehicles in the US and Europe. The deepening crisis has wiped billions of euros off the company’s shares and rocked the European car industry.
All the news and analysis
Yes. European car buyers were already growing less enamoured with diesel engines, and the autumn revelation that Volkswagen had installed software to cheat on emissions tests in 11m diesel vehicles worldwide will exacerbate the decline. Diesel’s penetration among new European cars peaked at 55 per cent in 2010 and has been dropping fast in France, where subsidies have been reduced and scepticism about the environmental impact has risen. VW is a particularly big maker of diesel engines and its sales dropped more than 20 per cent in key markets in November after the scandal. In 2016, diesel’s share will shrink so fast that it will outweigh the growth in the overall car market.
Will Brent crude end the year over $50?
Yes. The oil market in 2015 was brutal for anyone trusting in a rapid rebound from the previous year’s crash. The tenacity of the US shale industry and surges in output from Iraq and Saudi Arabia meant the world was awash with crude. Next year, the lifting of sanctions on Iran could bring yet more oil to the market. Still, the financial torments of oil producers worldwide are forcing them to cancel projects and cut drilling programmes, curbing future supplies, and the impact will become apparent. Brent crude below $50 per barrel is too low for the industry to make the investments needed to meet growing global demand. Providing the world economy does not skid into recession, this looks like being the year that the oil price heads back to more sustainable levels.
Will George Osborne scrap tax relief for pensions in his March Budget?
Yes. The UK chancellor put off making a decision on the matter at November’s Autumn Statement. But he sent a strong signal that far reaching change is coming. Upfront tax relief on pension contributions currently costs the exchequer nearly £50bn a year. A mooted “Pensions Isa” would slash this bill as workers would accumulate savings out of their taxed income instead, with the guarantee of withdrawing it tax-free upon retirement. The change would take years to implement. Taxpayers could prepare by making maximum contributions into pensions before the end of the tax year in April.
Will 2016 be the year virtual reality finally takes off?
No. But it will be the year in which many experience for the first time what may one day be the most transformative of all technologies. The first view through a VR headset — the chunky goggles used to view alternative 3D versions of reality — is, for most, unforgettable. But great demos don’t make an industry. While VR games are starting to appear, there is a shortage of content for the devices. And the applications that will push it into the mainstream — like visiting a doctor or holding an office meeting in virtual space — are more dream than reality. Still, the technology is set to captivate the public imagination. Physical reality will never seem the same again.