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The World Economy Could Have Six Black Swans In 2018 According To Some Chinese Observers

The World Economy Could Have Six Black Swans In 2018 According To Some Chinese Observers
Growth prospects in 2018 could be dampened by some "black swan" events according to some Chines observers even as a broad-based recovery has been witnessed by the global economy last year.
Events that are rare and which could result in catastrophic ramifications is called black swan events. such events are unique, eye-catching, and hard to find.
"One of the reasons behind economic strength last year was that we hardly saw any black swans," said Zhang Ming, a researcher with the Chinese Academy of Social Sciences (CASS).
In terms of the purchasing power parity terms, there would be an anticipated expansion of 3.5 percent in 2018, according to a report by the Institute of World Economics and Politics under the CASS.
In contrast, growth rates of 3.7 percent in 2018 was predicted by international organizations including the International Monetary Fund (IMF) which made the forecast in its World Economic Outlook in October.
"The lower prediction reflected our concerns over issues including asset price bubbles, high debt levels and geopolitical conflicts," said Yao Zhizhong, another researcher with CASS.
There would be six potential black swans that people should keep an out for and prepare to tackle them in 2018, according to Zhang.
"The fact that risks did not happen does not mean that they do not exist," Zhang said.
The political environment would be one of the major sources of uncertainties. Global oil prices could fluctuate due to political unrest in the Middle East between rival global and regional powers with a long-simmering history.
According to Zhang, events in Italy, after the elections, could also take the shape of black swans such as the country suddenly deciding to leave the European Union or its economy defaulting on its treasury bonds.
The global trade environment could also be impacted by any protectionist policies by the Trump administration in the United States.
Additionally, there can be events like balance sheet reduction by the Federal reserve in the U.S., driven by any sudden rise in inflation resulting in rate hikes. Such incidents, even though quite unlikely, could slow down the U.S. economy – thereby impacting the global economy.
The ending of the nine-year-long bull market I n the U.S. market could be another black swan event.
"Once the U.S. stock market takes a downturn, it could have a negative impact on asset prices in other countries, and curb consumer spending in the United States, which was the most important driver for its recent recovery," Zhang said.
Zhang said that other black swan events could emerge out of such events due to the interrelated nature of the global economy.
"If we could pay high attention to these potential risks and take measures to guard against them in advance, the impacts of black swans may not be as huge," Zhang said.

Christopher J. Mitchell

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