By Marcus Leach
As an eventful 2011 draws to a close we take a look forward to 2012 and what might happen around the world.
Jeremy Cook, World First’s chief economist, gives us his unique insight.
The UK economy will not enter a double dip recession
“The UK economy, like the economies in most developed nations, is struggling along at the moment with little cause for optimism in the short term," Cook said.
“We expect that the two toughest quarters for the economy will be Q4 this year (2011) and Q1 of 2012 - as consumer spending slows, business investment remains weak and government spending cuts continue.
“I expect growth will be timid in Q4 (0.1%) and predict a fall in Q1 by around 0.2%. However, the slow grind higher will restart as we head towards the summer.
“Forgive me for coming across as overly negative, but everyone must realise that the next couple of years - regardless of whether you live in Kensington, Kettering or Keswick - are going to be tough. You don’t get over 10 years of excess without a significant hangover.”
EU leaders will sort themselves out in 2012
“I’m not a natural optimist (a penchant for acoustic music and whiskey will do that to a man), but I do think that the great and the good of the European political system will come to their senses in 2012 and a lasting resolution to the continent’s debt problems will be found," Cook said.
“This will come from a new “fiscal compact” — a centralised government and the eventual transition to a United States of Europe.
“They will not do this as a result of anything other than another brush with the apocalypse. I’m not sure what the trigger will be (3 bad business confidence numbers from the Germans, France’s credit rating being cut, social unrest in Italy or the fall of another government) but something large will happen that will eventually shake the political class from this malaise.”
There will no large breakouts in FX rates over the next 12 months
“With all that is going on at the moment it is easy to think that we will see some kind of Armageddon unfold in 2012 - like disintegration in the currency markets, for example," said Cook.
“However we think this is highly unlikely, providing we avoid a Eurozone implosion that is (and then all bets are off and you better enjoy eating mud for dinner).
"I don’t think we will see a catastrophic slip in the value of the single currency over the course of the next 6 months, unless everyone’s worst fears are realised and a break-up ensues.
"The UK economy is full of problems at the moment as well, and although we are progressing at a faster rate than Europe, that is not really saying much.
"I do not think we will see a “double-dip” recession in the UK, but we will in Europe and this fits in with our estimations that GBPEUR will grind higher over the course of the next 6 months to reach a high of 1.23 and 1.28 in 12 months."
Republican Nomination will be won by Newt Gingrich
“Herman Cain has made enough headlines to get a talk show on Fox. He’ll probably write a couple of business help books and be happy for the rest of his life, while Perry’s debate implosions and Bachmann’s complete lack of appeal to centrists has also put them out of the game," Cook said.
“So, the nomination process is now down to Mitt Romney or Newt Gingrich and I think the latter will pull through. While he does not ignite the Republican heartland like Rick Perry may do, I think the Republicans have learnt their lesson from the debacle that was the McCain/Palin campaign in 2008.
“He is centrist, a good fundraiser and gives them the best chance of taking back the White House.
“Obstacles to his bid include his ties to Freddie Mac and elements of his personal life. Although show me a politician that hasn’t got some kind of skeleton in their closet and I’ll show you a private investigator that needs to work harder.”
President Obama will retain the Presidency
“Obama’s first term has been a tough one and his approval ratings have fallen, as distrust for the Washington political machine has increased," said Cook.
“His healthcare reforms have become the most divisive issue since the Patriot Act, and while they have solidified some of his base, they have also been a stick which Republicans have ‘beat him up’ with repeatedly.
“A bumper sticker I saw during a recent holiday to the US said: “I hated Obama before it was cool”. There’s now doubting the man cuts a divisive figure as 2012 approaches.
“That being said, I still expect that he will retain the Presidency with few problems and, as long as he makes a decent showing in the Ohio and Pennsylvania debates, securing the winning number of electoral college votes should not pose too much of a problem.”
The Olympics in London will be marred by protest, transport issues and price gouging
“The Olympics are famous for showcasing the extent of human endeavour. Unfortunately I believe the motto "Faster, Higher, Stronger" will be replaced by “Dirtier, Busier, Angrier” for the 2012 games in London," predicts Cook.
“Our transport infrastructure is unfortunately unable to deal with a busy Friday night in London, let alone with the expected 5.5m day visitors we will see at the Games.
“I also suspect that the security levels surrounding the games will be higher than ever before for fear of terrorist attack, anti-capitalist protest or such like. Price increases are also assured as local businesses try and make a quick buck.”
Israel will commit military operations against Iran
“This is a popular thought amongst those of us who believe that these two countries represent more of a threat to each other than two rather irritable kids confined to the same playground," Cook said.
“The November 2011 IAEA report that showed “deep and increasing concern” over Iran’s experiments to design a nuclear weapon is the latest in a long line of censures by the world’s authority on atomic energy. This, combined with a weak Netanyahu government in Israel, could be the catalyst that sees Israel move to protect herself in 2012.
“The increase in oil prices, and the subsequent inflationary pressures, is one thing that central banks are worried about moving into 2012.”
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