It is hard to predict what is going to happen to the European and global economies next

7 july 2016

“An important event whose anticipation was affecting trends in foreign exchange markets and stock indexes in May through June 2016 was the Brexit referendum that was held on June 23,” Analytical Center experts write in their bulletin titled Taking the Pulse: Brits Vote to Leave the EU. In Focus: Results of Two Years of Low Energy Prices. It came as quite a surprise not just for the experts but for the British people themselves that the majority voted to leave the EU in the Brexit referendum, the experts believe.

After the referendum results were announced on June 24, the exchange rates of many currencies fell sharply, the British pound lost 8%, and the indexes of the global stock exchanges followed suit. The experts say that at this stage it is hard to predict how the situation is going to evolve now and what impact all of this is going to have on the British, European and global economies over the next few years.

The authors of the bulletin point out that there is currently a lot of variation in the level of GDP growth in the key economies of the world: from negative 5.4% in Brazil to plus 7.9% in India. “‘Even though most leading economies are continuing to grow, there is a lot of anxiety that reveals itself in a broad range of bond rates, stock exchange volatility and the slowing down of global trade,” the experts write.

As for the global oil prices in 2016: the fact that the oil price went from a minimum of USD 28 a barrel in January to more than USD 50 a barrel in June has had a significant impact on the global economy. Oil exporters are no longer quite as nervous about further decline in the oil price and they are now even expecting to see gradual stabilization in the oil market, even though the variability in the rates of economic growth across the world is keeping consumption of cheap energy from growing, the experts believe.

The specialists also mention the Statistical Review of World Energy 2016 published by BP in early June, which points out that demand for oil and other types of energy is growing rather slowly: primary energy consumption around the world grew by less than 1% in 2015. While prices for all energy resources remain low, competition between different types of fuels is holding back the use of relatively cheap coal and driving up demand for natural gas and to some extent for oil. In the meantime, regional differences in economic growth lead to significant fluctuations of demand for primary energy. The trend towards more efficient use of energy persists around the world, even though it has slowed down relative to previous years.

For more see the bulletin Taking the Pulse: Brits Vote to Leave the EU. In Focus: Results of Two Years of Low Energy Prices.  

For other issues of our bulletin on current trends in the global economy see Publications.