Closing books, turning pages
The next year has less known unknowns than this time in 2016, but likely just as many unknowns as ever! A key focus in 2018 will be the effects of tax cuts in the US, which President Trump should sign off at the start of the year. Brexit negotiations will continue to dominate the UK outlook, while inflation data in the UK, as well as the US and Europe, will be watched closely which will set the tone of central banks all over the world. Also in the first quar- ter, upcoming Italian elections in early March will dominate the political agenda. The latest polls in Italy suggest an inconclusive result, with neither the centrist parties or the anti-European Five Star Movement expected to win enough seats to rule outright. For 2018, at least 18 elections are scheduled, including in emerging markets like South Africa and Indonesia. Latin America will witness its heaviest political calendar in over a decade. According to an index created by the Institute of International Finance, sovereign credit ratings have trended to their lowest level since 2010. In addition to sovereign downgrades for China, South Africa and Turkey, there were 43 corporate downgrades in emerging markets in the third quarter, compared with 16 upgrades, ac- cording to rating agency Standard and Poor’s. The rating trend suggests the agencies are still worried about the sustainability of many emerging countries’ high levels of debt and ability to refinance it as rates rise. Regarding Turkey, the agenda will be dominated by upcoming local elections which will set the scene for presidential elections in 2019. On the economic front, the long-awaited structural reforms may be released but the effects could be limited in the aftermath of the coup attempt in 2016.