quarterly forecasts

2017 Second-Quarter Forecast

6 MINS READApr 10, 2017 | 11:42 GMT
Trade will be at the forefront of many leaders' minds this quarter.
(Stratfor)

Overview

Trade will be at the forefront of many leaders' minds this quarter as a new U.S. administration settles into the White House. Uncertainty surrounding the White House's intentions will linger, prompting the United States' biggest trade partners to look for new economic relationships elsewhere. Some will leverage security cooperation and promises of investment to get on Washington's good side -- or, at the very least, to try to fend off its punitive action. ...

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Global Trends

Chief among Washington's concerns this quarter is the expiration of the temporary spending bill that funds the government through April 28. The administration's request for $30 billion in supplemental national security funding, which includes provisions for the construction of a wall along the U.S.-Mexico border, would break the budget cap set for the 2017 fiscal year by $10 billion. But if Congress fails to approve at least some of the additional spending, large portions of the government could face a shutdown -- offering a preview of even more contentious budget battles to come as lawmakers gear up for the 2018 fiscal year.
Apr 4, 2017 | 16:54 GMT
The administration of Donald Trump has said it would

The administration of Donald Trump has said it would "level the playing field" of the global economy.

section Highlights
  • The constraints on U.S. President Donald Trump's administration will become more visible this quarter as it encounters new showdowns with Congress, and the government may shut down if political gridlock on a supplemental budget cannot be broken by April 28.
  • The White House will try to deflect attention away from its problems by focusing on trade, relying on the WTO to enforce international regulations even as it threatens to flout the organization to gain leverage in bilateral negotiations.
  • China -- the primary target of Washington's punitive trade measures -- will barter pledges of investment and cooperation against North Korea to try to manage its mounting tension with the White House.
  • OPEC will extend its agreement to collectively trim oil production for another six months, though Saudi Arabia and its GCC peers will shoulder most of the cuts.

Trade will be at the forefront of many leaders' minds this quarter as a new U.S. administration settles into the White House. Uncertainty surrounding the White House's intentions will linger, prompting the United States' biggest trade partners to look for new economic relationships elsewhere. Some will leverage security cooperation and promises of investment to get on Washington's good side -- or, at the very least, to try to fend off its punitive action. ...

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Europe

To the west of Eurasia lays Europe, a region predisposed to division. It is surrounded on nearly all sides by islands and peninsulas that make it difficult for Europe to cohere. The northern half of the continent, moreover, sits on a plain whose short, meandering rivers tend to empower countries without forcing them to work with others. The southern half is situated on more mountainous terrain that has historically impeded the creation of strong, unified economies. As a result, Europe is a continent riven by pockets of distinct cultures whose differences are all too often irreconcilable.

Apr 4, 2017 | 16:47 GMT
Europe is a continent riven by pockets of distinct cultures whose differences are all too often irreconcilable.

Europe is a continent riven by pockets of distinct cultures whose differences are all too often irreconcilable.

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  • Presidential and legislative elections in France will play a deciding role in the future of the eurozone as voters choose between pro- and anti-EU parties.
  • Italy will inch closer to holding new general elections, and the prospect of victory for Euroskeptic forces will do little to assuage doubts about the health of the country’s banks and Rome’s sizable public debt.
  • Brexit negotiations will formally begin, but progress will be slow. 

    The first topics on the negotiation agenda will include the United Kingdom’s financial commitments and the rights of EU and British citizens

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  • As the weather improves in the Mediterranean Sea, more migrants will seek entry into Southern Europe, testing the resilience of the Continent’s immigration deal with Turkey and generating new friction among EU members.
See more on this Region

Trade will be at the forefront of many leaders' minds this quarter as a new U.S. administration settles into the White House. Uncertainty surrounding the White House's intentions will linger, prompting the United States' biggest trade partners to look for new economic relationships elsewhere. Some will leverage security cooperation and promises of investment to get on Washington's good side -- or, at the very least, to try to fend off its punitive action. ...

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Eurasia

Eurasia is the world’s most expansive region. It connects the East to the West, forming a land bridge that borders Europe, the Asia-Pacific, the Middle East and South Asia. Forming the borders of this massive tract of land are the Northern European Plain, the Carpathian Mountains, the Southern Caucasus Mountains, the Tien Shan Mountains and Siberia. At the heart of Eurasia is Russia, a country that throughout history has tried, to varying degrees of success, to extend its influence to Eurasia’s farthest reaches — a strategy meant to insulate it from outside powers. But this strategy necessarily creates conflict throughout Russia’s borderlands, putting Eurasia a near constant state of instability.

Apr 4, 2017 | 16:47 GMT
Eurasia connects the East to the West, forming a land bridge that borders Europe, the Asia-Pacific, the Middle East and South Asia.

Eurasia connects the East to the West, forming a land bridge that borders Europe, the Asia-Pacific, the Middle East and South Asia.

section Highlights
  • The standoff between Russia and the West will persist this quarter as Western resentment of Russian aggression festers, risk heightens on the Syrian battlefield and each side continues its military buildup.
  • Russia will target Europe -- particularly France, Germany, Italy and the Balkans -- with information and disinformation campaigns in an attempt to further divide the Continent.
  • At home, Russia’s political atmosphere will remain tense as economic stagnation spurs protests and Kremlin elites make power grabs.
  • The conflict in eastern Ukraine will endure over the next three months, since the Minsk protocols’ security and political components are unlikely to be implemented.
See more on this Region

Trade will be at the forefront of many leaders' minds this quarter as a new U.S. administration settles into the White House. Uncertainty surrounding the White House's intentions will linger, prompting the United States' biggest trade partners to look for new economic relationships elsewhere. Some will leverage security cooperation and promises of investment to get on Washington's good side -- or, at the very least, to try to fend off its punitive action. ...

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Middle East and North Africa

The Middle East and North Africa is the world's crossroads. It encompasses the Arabian Peninsula, the mountains of Iran, the plains of Turkey, the deserts of the Levant, the lands north of the Sahara and all coasts in between. The story of the region, as is so often the case of places stuck between foreign players, is the story of trade, exchange and conflict. The traditional powers of the region are Turkey and Iran — Saudi Arabia and Egypt are the current Arab powers — and their competition for influence over the region's weaker states makes the Middle East and North Africa an arena of violence and instability.

Apr 4, 2017 | 16:47 GMT
The Middle East and North Africa encompasses the Arabian Peninsula, the mountains of Iran, the plains of Turkey, the deserts of the Levant, the lands north of the Sahara and all coasts in between.

The Middle East and North Africa encompasses the Arabian Peninsula, the mountains of Iran, the plains of Turkey, the deserts of the Levant, the lands north of the Sahara and all coasts in between.

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  • In Syria, the United States will face growing complications on the battlefield as it tries to avoid collisions with Russia while trying to remain focused on an offensive against the Islamic State in Raqqa
  • Turkey will try to use flare-ups in the Syrian civil war to draw deeper U.S. involvement while focusing more attention on an escalating proxy battle with Iran in northern Iraq.
  • In Iraq, the operation to reclaim Mosul from the Islamic State will come to a close this quarter, and coalition forces will turn their attention to retaking the extremist group's remaining strongholds, Tal Afar and Hawija.
  • Even as U.S.-Iran frictions will escalate in the runup to Iran's presidential election, both sides will take care to keep the JCPOA nuclear deal intact.
See more on this Region

Trade will be at the forefront of many leaders' minds this quarter as a new U.S. administration settles into the White House. Uncertainty surrounding the White House's intentions will linger, prompting the United States' biggest trade partners to look for new economic relationships elsewhere. Some will leverage security cooperation and promises of investment to get on Washington's good side -- or, at the very least, to try to fend off its punitive action. ...

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Asia-Pacific

The Asia-Pacific is home to more people than any other region. Centered on the western rim of the Pacific Ocean, this region includes the easternmost countries of continental Asia as well as the archipelagos that punctuate the coast. Several of these countries, most notably China, experienced rapid economic growth in the second half of the 20th century, giving the region a new sense of global economic relevance that continues today. That relevance, however, depends largely on China, a power in transition whose rise is testing the network of U.S. alliances that have long dominated the region. How effectively Beijing manages its transition will shape the regional balance of power in the decades to come.

Apr 4, 2017 | 16:49 GMT
Centered on the western rim of the Pacific Ocean, the Asia-Pacific region includes the easternmost countries of continental Asia as well as the archipelagos that punctuate the coast.

Centered on the western rim of the Pacific Ocean, the Asia-Pacific region includes the easternmost countries of continental Asia as well as the archipelagos that punctuate the coast.

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  • Chinese President Xi Jinping's administration’s overriding focus on preparations for the pivotal Party Congress (likely to be held in October) will translate into policies that prioritize economic and social stability over risky reforms.
  • China will use economic pressure against North Korea to try to rein in Pyongyang's nuclear program and gain leverage against Washington on other issues, particularly U.S pressure on trade. Beijing will avoid, however, taking actions that threaten North Korea’s economic lifelines in China and destabilize Kim Jong Un's government.
  • The upcoming fishing season will test the fragile reconciliation between China and ASEAN states, particularly the Philippines, while Washington and Tokyo will step up maritime activities in the disputed waters.
See more on this Region

Trade will be at the forefront of many leaders' minds this quarter as a new U.S. administration settles into the White House. Uncertainty surrounding the White House's intentions will linger, prompting the United States' biggest trade partners to look for new economic relationships elsewhere. Some will leverage security cooperation and promises of investment to get on Washington's good side -- or, at the very least, to try to fend off its punitive action. ...

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Americas

The Americas stretch from the Arctic Circle in Canada to the southern tip of Chile. This geographically, culturally and politically diverse region is home to the United States, a nation whose geography helped it become the foremost economic and military power in the world — an ascendance aided in part by bringing Mexico and Canada into its sphere of influence. Farther south, the nations of South America are like islands, separated by vast spaces of impenetrable mountains, rivers and jungles. Try though these countries may to integrate more closely, deeper ties such as those that characterize North America will prove elusive.
Apr 4, 2017 | 16:49 GMT
This geographically, culturally and politically diverse region is home to the United States, a nation whose geography helped it become the foremost economic and military power in the world

This geographically, culturally and politically diverse region is home to the United States, a nation whose geography helped it become the foremost economic and military power in the world

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  • U.S. President Donald Trump will trigger the process of renegotiating NAFTA this quarter, though talks on the bloc's future won't formally start until at least the third quarter.
  • Mexico will explore the possibility of increasing trade with would-be members of the ill-fated Trans-Pacific Partnership, the European Union and South America to reduce its dependence on U.S. imports.
  • Faced with the persistent threat of financial default and social unrest, Venezuela will keep a close eye on its military to reduce the risk of a coup.
  • As his brief tenure threatens to be cut even shorter by an electoral court investigation, Brazilian President Michel Temer will try to present pension reform -- a key part of his austerity agenda -- to the lower house.
See more on this Region

Trade will be at the forefront of many leaders' minds this quarter as a new U.S. administration settles into the White House. Uncertainty surrounding the White House's intentions will linger, prompting the United States' biggest trade partners to look for new economic relationships elsewhere. Some will leverage security cooperation and promises of investment to get on Washington's good side -- or, at the very least, to try to fend off its punitive action. ...

section

South Asia

Everything that informs geopolitics can be found in South Asia: challenging demographics, geographic diversity, and contentious, ill-defined borders. The Himalayan Mountains form the northern border of South Asia, whose two main rivers, the Indus and the Ganges, support the region’s great population centers. India is the region’s dominant country, home to the world’s fastest growing economy. But its rivalry with neighboring Pakistan, a fellow nuclear power and growing consumer market, has made South Asia one of the world’s most dangerous nuclear flashpoints. The region is also a testament to how militancy and militarism can undermine the regional integration needed to unleash higher economic growth.

Apr 4, 2017 | 16:50 GMT
Everything that informs geopolitics can be found in South Asia: challenging demographics, geographic diversity, and contentious, ill-defined borders.

Everything that informs geopolitics can be found in South Asia: challenging demographics, geographic diversity, and contentious, ill-defined borders.

section Highlights
  • Now that India's Parliament has passed the federal component of the Goods and Services Tax bill, state legislatures across the country will begin the lengthy process of passing their own versions of the measure.
  • Ties between New Delhi and Islamabad will stabilize this quarter since, with state election season behind it, India has less political incentive to censure Pakistan.
  • Pakistan, meanwhile, will shift its strategic focus toward securing the Afghan border in anticipation of the Taliban's spring offensive.
  • In Nepal, the Madhesi ethnic group's demands for greater political autonomy, and the opposition Communist Party of Nepal (Unified Marxist-Leninist)’s resistance, will make local elections in May a point of contention.
See more on this Region

Trade will be at the forefront of many leaders' minds this quarter as a new U.S. administration settles into the White House. Uncertainty surrounding the White House's intentions will linger, prompting the United States' biggest trade partners to look for new economic relationships elsewhere. Some will leverage security cooperation and promises of investment to get on Washington's good side -- or, at the very least, to try to fend off its punitive action. ...

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Sub-Saharan Africa

Sub-Saharan Africa is a study in diversity. Covering an area that spans the entire width of the continent beginning at the Sahara Desert and ending at the southernmost tip of South Africa, the region is home to countless cultures, languages, religions, plants, animals and natural resources. It’s no surprise that it captured the imagination of Europe’s earliest explorers — and that it continues to capture the imagination of current world powers eager to exploit it. And yet despite the region’s diversity, Sub-Saharan African countries have common challenges — transnational terrorism, rapid population growth, endemic poverty and corruption — that prevent them from capitalizing on their economic potential. The coming years will be critical for the region, especially as its political institutions mature in a rapidly globalizing world.

Apr 4, 2017 | 16:50 GMT
Covering an area that spans the entire width of the continent beginning at the Sahara Desert and ending at the southernmost tip of South Africa, Sub-Saharan Africa is home to countless cultures, languages, religions, plants, animals and natural resources.

Covering an area that spans the entire width of the continent beginning at the Sahara Desert and ending at the southernmost tip of South Africa, Sub-Saharan Africa is home to countless cultures, languages, religions, plants, animals and natural resources.

section Highlights
  • Rising concerns over Nigerian President Muhammadu Buhari’s health will complicate the government’s attempts to push through an ambitious reform meant to improve Nigeria’s business climate.
  • South Africa’s presidential succession battle will intensify as opposing camps within the ruling ANC push their visions of reform and President Jacob Zuma tries to strengthen his hand.
  • The stalled deal between the Democratic Republic of the Congo’s ruling party and opposition will be at greater risk of collapse this quarter, making elections less likely to be held by the end of the year.
  • Mozambique will be forced to restructure its debts with bondholders to pave the way for the IMF bailout it needs to continue developing its burgeoning oil and natural gas sector.
See more on this Region

Trade will be at the forefront of many leaders' minds this quarter as a new U.S. administration settles into the White House. Uncertainty surrounding the White House's intentions will linger, prompting the United States' biggest trade partners to look for new economic relationships elsewhere. Some will leverage security cooperation and promises of investment to get on Washington's good side -- or, at the very least, to try to fend off its punitive action. ...

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