This text is an extract of a larger work on the “State of the economy” by Fynamics:
2018 was not a good year for the Financial Sector, especially the fourth quarter. Globally speaking, also in 2019 mounting stress on trade between the U.S.A. and China didn’t improve the situation and dynamics in the world go on, just to name a few:
- Economic center of gravity continues shifting rapidly from the West to the East. The proof is that low-wage Asian countries started distributing work from the West, to other Asian countries. This makes sense, as it optimizes the workload at continental level and improves cost-efficiency. The same continental optimization is happening since many year in Europe, with a shift from Central Europe to, for example Ireland, and East European countries. What is striking, is that we start to see in some cases, Asian companies outsourcing work back to Europe, e.g. India outsourcing to Portugal.
- An overdue recession creates uncertainty about the level of risk to take when making investments. Central Banks across the world, but mainly in the West, are keeping interest rates intentionally low, delaying a recession.
- The Financial Sector, and mainly banks, are drastically re-positioning themselves to keep attractive balance sheets. More importantly to remain competitive, banks will have to re-invent themselves over the next 10 years.
- Investments are being made, mainly by the East, in Africa. Africa has huge economic growth potential, that is yet to be unlocked.
- In Europe, the division amongst EU-members remains sizeable. Greece still has significant outstanding debt towards EU but tension in the EU is less than at the peak when Grexit was on the table, the 2015 migration crisis -still very relevant- divides the EU, the outcome of the Brexit reduces EU’s influence at macro-economic level.