"Saxo Bank"s Chief economist Steen Jacobsen gave an interview to Report News Agency:
- What is your opinion about economic development of both developed countries and developing countries for the next 5 years?
- Wow, big question….. I just released major forward looking outlook: 2015 a lost year for growth and recovery – rest of 2015 will see higher interest rates, slightly weaker US$ and higher commodity prices – then in early 2016 will see recession in Europe and a flirt with recession for the US, meaning new lows in yield, strong US$ and weak equity market. This means I believe 2016 is the absolute low in the this “crisis mode” – from H2 2016 onward I expect the business cycle to slowly normalise and heal, and we will finally start to move forward but from a very low point. In technology terms we have several important headwinds – demographics - ageing population - The race against the machine, the fact that technology/robots short-term replaces more jobs than it creates this leaves “lower than expected growth” and employment as the expected forward future, but it also offer great possibilities of catching up for developing countries. Several developing countries needs to get to serious crisis point to embrace a true reform a mandate for change - I think it happens in 2016, hence I am not really concerned about neither developed or emerging countries – all of them needs reform, all of them will see reform through a crisis end of 2015 into 2016, which will unleash next big upcycle.
- What do you think about financial markets for the next 5 years?
- More volatile and finally with less regulation. Regulations needs to be anti-cyclical and they have gone too far. The banks will continue to be less and less important and the growth will in securization and big guaranteed infrastructure bonds will be next big theme in financial markets. I also expect Asian and emerging market to open up significantly, as the need for capital&investment will supercede the tendency to have closed economies.
- What do you think about liquidity problem of the developing countries?
- It’s real threat, and is partly too many trades in the same instruments, and a regulatory framework, plus massive intervention from government and central banks in the market. When QE finally dies, market will recover.
- What are the prospects of USD against its key counterparts for the next 5 years?
- There is one more phase of strength coming in early 2016, but the US$ will start secular weakness for next decade from 2016.
- What is your opinion about the Fed rate hike start date, duration and its influences on the financial markets?
- September, one-only, and it will be negative as it’s a margin call on the market. Meaning the hike will be from a need to move rates, rather than based on economics. Fed will surprise.
- Economic situation of China: Is there any signs of a devaluation? If yes, then how will this devaluation affect the global economy?
- No, the path seems to be to avoid a hard-landing through aggressive monetary easing. It seems the Chinese leadership have great faith in Silk Road but also understand it will take time to implement, leaving room and need for additional help from easier monetary policy.
- How do you assess the economy of Russia and its prospects? How will a new economic crisis in Russia affect the world economy and Azerbaijan?
Russia is struggling - economically and politically (with the sanctions) – growth is expected to be minus 5% but… it seems energy prices have surprised to the upside creating some relief in the economic condition. Of course, Russia sanctions remains in place and overall global growth remains under I think it’s important to note that no one gains from Russia’s crisis. The world economy will see small loss of growth, but the biggest loss is on the political agenda where Europe’s “hand” to old Russian states have stopped since the crisis broke. The impact of Azerbaijani is hard to quantify, but it’s a loss that remain inquestionable.