The Financial Times does not do horoscopes. But that does not mean we shy away from predicting the future. As in previous years, our experts are back with their crystal balls to shed light on the biggest questions of 2014. From the winner of next year’s football World Cup to the valuation of virtual currencies, there is little we do not have an answer for.
Of course, the answers we give are not always right. In 2012 we failed to read the runes on Europe’s two main elections in 2013 – Italy and Germany. Quentin Peel anticipated that Angela Merkel would stay in power, but picked the wrong coalition partner – the Greens instead of the Social Democrats. Guy Dinmore – erroneously – plumped for Mario Monti to become Italy’s finance minister after the vote.
Yet, on the global economy, our forecasts were mostly accurate. Martin Wolf was right that no major central bank would raise interest rates. Chris Giles astutely dismissed the idea that the UK would suffer a triple-dip recession – although, like most pundits, he could not foresee the rapid pickup in economic growth of the past few quarters.
Our two boldest calls proved false – but only by a whisker. Janan Ganesh was adamant that England’s big four Premier League clubs would all change managers. He was wrong on Arsenal, where Arsène Wenger is still in charge, but spot on with Chelsea and the two Manchester clubs. Gideon Rachman predicted that there would be a western military intervention in Syria – and there nearly was. Twelve months from now we will know whether our soothsaying has improved. But for now, here are our bets – rien ne va plus! Ferdinando Giugliano
Will the Bank of England raise interest rates in 2014?
Yes. It is fashionable to think this is an absurd question to which the answer is obviously no. But not for the first time, fashion sucks. The British economy is growing at an annualised rate of more than 3 per cent, unemployment is rapidly falling towards the Bank of England’s 7 per cent threshold when it considers rate rises and inflation has been above the central bank’s 2 per cent target for all of the past four years. The reason the BoE would keep rates on hold at 0.5 per cent amid a fast expansion is a rapid improvement in productivity, allowing recovery to coexist with an absence of inflationary pressure.
The bank has predicted an imminent productivity improvement every quarter since 2008, but it remains elusive. In the third quarter, growth was 0.8 per cent but hours worked rose faster at 1 per cent, indicating another drop in productivity. More of this is the most likely prediction for 2014, so the BoE is likely to be forced to raise interest rates. Chris Giles
Will anti-EU fringe parties make big gains in the European parliamentary elections?
Undoubtedly. The European elections, which will be held in May, offer perfect conditions for dramatic advances by the far-right, the far-left and other anti-EU groups. Weak economies, high unemployment, disillusionment with the EU and with mainstream political parties, a low turnout and proportional representation will combine to ensure that the political fringe captures more than 25 per cent of the seats in the parliament. Watch out in particular for the National Front in France, the UK Independence party in Britain, Syriza in Greece and the Dutch Freedom party – all of which could top the polls in their respective nations. The results will be traumatic for mainstream European parties across the continent. In the European parliament itself, conservatives and socialists will be forced to huddle together in the centre, to preserve a pro-EU majority. Gideon Rachman
Will Abenomics succeed in lifting Japan’s core inflation rate to 2 per cent by the end of 2014?
No. The aim of the policy known as “quantitative and qualitative easing”, announced in April this year, is to achieve and then maintain 2 per cent inflation (judged the equivalent of price stability), “at the earliest possible time, with a time horizon of about two years”. Between January and October 2013, the core consumer price index rose 0.6 per cent, a reversal of the previous deflationary trend, largely due to depreciation. The economy is also growing faster than potential, albeit erratically so, thereby closing the output gap.
But the proposed doubling of the Bank of Japan’s holdings of Japanese government bonds, even together with the more than doubling of their maturity, is unlikely to be enough to achieve the target in little more than a year. More action will be needed, particularly in view of the ill-timed rise in the tax on consumption planned for next year. Martin Wolf
Will the era of commercial space tourism begin in 2014?
Back in 2004, Sir Richard Branson announced a bold plan to launch the world’s first commercial space travel business, Virgin Galactic. A fleet of five spaceplanes would carry 3,000 “astronauts” on short suborbital flights between 2007 and 2012, he said then. Now, after seven years of delay caused by a range of technical and regulatory problems, Sir Richard declares that Virgin Galactic really will begin space tourism flights from Spaceport America in southern New Mexico in August 2014. Already about 600 would-be astronauts have booked $250,000 seats on Virgin’s SpaceShipTwo aeroplanes, which will carry them to an altitude of 110km – with about five minutes of weightlessness and spectacular views from the blackness of space. The venture’s delays so far would make it easy to forecast another missed target date but there seems to be more realism around Virgin Galactic these days, so I will predict a first commercial flight in December. Clive Cookson
Who will win the World Cup?
The outcome of any football World Cup is surprisingly random. That is because it is a short tournament. The winner plays just seven games. Over such a short timeframe, luck plays a huge role, especially in later rounds, when most games are decided by a single goal, or on penalties. The difference between triumph and rotten tomatoes can depend on a few inches here or there on a couple of shots. Still, if you had to pick a winner, it would probably be the hosts. Brazil have a respectable team, with a genius up front in Neymar. In June they won the World Cup’s dress rehearsal, the Confederations Cup. And the sports economist Stefan Szymanski has shown that home advantage is worth two-thirds of a goal per game in global soccer. However, Brazil’s odds of just 3-1 with most bookmakers are too short given the randomness of the World Cup. A better bet is Italy, available at 28-1 with some bookmakers. Simon Kuper
Will the oil price fall below $100 a barrel?
Rampant supply growth and modest increases in demand will lower prices. That is the consensus view for international oil markets in 2014. But will it come to pass? Ali al-Naimi, the Saudi oil minister, is not exactly a disinterested observer, but his view that the “market is in the best situation it can be” is not without merit. For all the talk of rising supply and the shale revolution there is a good chance that Brent, the international oil benchmark, will average more than $100 a barrel next year – as in every year since 2011. One reason is demand. Not only is US consumption strong but Europe is also recovering. Energy Aspects, a consultancy, reckons demand growth of 1.5m barrels a day is possible next year if emerging market demand (and currencies) hold up in the wake of tapering by the US Federal Reserve. To put that in context, most analysts expect growth of 1.2m b/d. There is a good chance that supply outages in Iraq, Libya and Nigeria – which have provided a prop for Brent – continue. And while relations between the west and Iran are improving, the Islamic republic cannot export more than 1m b/d. In fact, instability in the Middle East means the risks of price spikes are bigger than a large decline. Neil Hume
Will China’s growth rate fall below 7 per cent?
No. China bears have had much encouragement in 2013; many are in a lather of anticipation that 2014 will bring a crash. Bad loans are piling up, the shadow financial system is in chaos and local governments are mired in debt. Overcapacity in almost every industry is crimping corporate profits. The costs of credit, electricity, water and other key inputs are all set to rise as Beijing pursues a new reform agenda.
Housing bubbles in some parts of the country have already burst, while home prices scale giddy heights elsewhere. Surely these signs portend a bust? No. According to China Confidential, an FT research service, gross domestic product growth next year is likely to come in at slightly more than 7 per cent following an expected 7.6 per cent rise this year. The case for this optimistic outlook rests mainly on continued strong consumer spending, a booming service sector and what is probably the world’s least noticed key trend – the monetisation of China’s vast rural economy. James Kynge
Will Narendra Modi be India’s next prime minister?
Yes. Mr Modi of the Hindu nationalist Bharatiya Janata party has the best chance of forming the government after the 2014 general election. He is ambitious, well-organised and a persuasive orator. Investors admire his performance as chief minister of Gujarat. The BJP did spectacularly well in recent state elections in Rajasthan and Madhya Pradesh, partly because voters are deeply disenchanted with the Congress party that has governed at the centre for the past decade. But he is no shoo-in. The BJP has little presence in the south or the northeast of India, while Mr Modi’s reputation as a Hindu militant makes it hard for him to win support from Muslims or from the regional political parties he is likely to need help from to form a coalition. Alternatives to a Modi premiership include a government led by a more inclusive BJP leader, and a “third front” administration of regional and leftist parties. Victor Mallet
Will the plan for a new high-speed rail link between London, Leeds and Manchester be scrapped?
Alas, no, although it should be. The economic case for High Speed 2 is flimsy. The £50bn project offers poor value for money and will contribute little towards reducing the existing gap between the north and the south of England. Voters are also sceptical – 55 per cent of Britons would like to stop the train, a YouGov poll has shown. Yet, the cross-party consensus HS2 enjoys will continue into 2014. David Cameron, the Conservative prime minister, and Nick Clegg, his Liberal Democrat deputy, are personally committed to the link. And while the Labour party is more sceptical, the leadership will not want to put itself at odds with its strongholds in the north, where support for HS2 is strongest. When the HS2 bill is discussed in parliament next year, expect the government to reduce the project’s headline cost by cutting the contingency. Politicians will then have the perfect alibi to let the white elephant continue its journey. Ferdinando Giugliano
Will “Obamacare” go into a death spiral?
No. The rollout of President Barack Obama’s signature healthcare reform has been disastrously planned and executed. And it faces more glitches in 2014 – not least in integrating the online exchanges with the Internal Revenue Service and the health insurance companies. There will also be continuing furore over the millions of Americans who have lost their existing coverage. Republicans will not let up on their promise to repeal the law. But it will survive. Premiums will be higher than they should be because fewer healthier people will sign up than projected. And controversy over the law will contribute to a bad Democratic showing in the November midterm Congressional elections. But Obamacare will end the year intact, with millions of uninsured newly included in the healthcare system. Eventually Obamacare’s technical glitches will be forgotten. And it will gradually take its place alongside Medicare and Social Security as a key feature of the US entitlements system. It will be Mr Obama’s legacy. Edward Luce
Will Julian Assange and Edward Snowden still be fugitives from justice at the end of 2014?
Julian Assange, the founder of WikiLeaks, took refuge in the Ecuadorean embassy in London in June 2012 to avoid extradition to Sweden, where he faces arrest on suspicion of rape and sexual assault. Conditions in the mission are cramped. Mr Assange is restricted to living in a few hundred square feet of admittedly prime Knightsbridge property. Edward Snowden, who is wanted by the US for leaking a huge number of National Security Agency files when he was employed there as a contractor, is in altogether more comfortable digs. He lives in Moscow after fleeing the US in May and can happily explore the whole of Russia if he wants. The US authorities would dearly love to extradite Mr Snowden, not least because they still do not know how much of the NSA’s data he downloaded. The fates of the two men look like being very different. Mr Assange is much the smaller of the two fish as far as US intelligence is concerned. He is also the one most likely to give himself up this year, not least because the alternative involves staying put for another eight years until his extradition warrant expires under the statute of limitations. Mr Snowden is unlikely to be leaving Russia of his own volition for many years to come, if ever. James Blitz
Will Scotland vote for independence in 2014?
No. While the opinion polls have been volatile over the past year, there has been a consistent majority in favour of retaining the union, with the lead varying between 10 and 30 percentage points. True, some uncertainties have been introduced that could yet influence the outcome when Scotland votes next September, such as the decision to extend the franchise to 16- and 17-year-olds. As under-18s are not eligible to vote in British general elections, their intentions are less easily gauged. The campaigning genius of Alex Salmond, the Scottish Nationalist leader and first minister, should also not be underestimated. Nonetheless, Scotland looks likely to vote to stay in the UK. The bigger question concerns the margin of victory for the “Better Together” campaign. It is quite possible that this may be narrower than unionists hope and insufficient to settle the question. Battle will then be resumed over the devolution of further powers to the Scottish government, with possible ramifications for the wider relationship between the component nations of the UK. Jonathan Ford
Will the value of Bitcoin fall below $50?
Yes. The price of a Bitcoin recently touched $1,200. Enthusiasts point out that the virtual currency cannot be minted at a central banker’s whim. But its value regularly moves by 10 per cent overnight. That is confounding if you strike a deal one day and pay up the next. Even on Silk Road, the secret website where Bitcoins were traded for illegal drugs, prices were generally quoted in dollars. As a currency, Bitcoin will never catch on.
Chinese investors are said to favour Bitcoins as a way of evading capital controls. Others believe that prices can only go up. Yet governments could easily shut down the exchanges where virtual cash can be swapped for hard currency. China dealt a blow to investors this month with its sadistic decision not to ban the digital tokens outright but to prohibit purchases of Bitcoin. Speculators need only fear similar moves elsewhere for Bitcoin to lose its value. So, expect prices to fall. But do not bet on the timing: as Keynes pointed out, markets can stay irrational for longer than you can stay solvent. Mark Vandevelde
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