x Abu Dhabi, UAEMonday 24 July 2017

Banks take predictions to the extreme

Imagine a world in which oil sells for US$50 a barrel, the United Kingdom is not part of Europe and Ukraine is one of many Russian satellite states. If you're thinking 1970s, then think again and let your mind take you back to the future.

Solar projects in North Africa would start supplying clean energy to Europe, one of the predictions note. Rafael Marchante / Reuters
Solar projects in North Africa would start supplying clean energy to Europe, one of the predictions note. Rafael Marchante / Reuters

Imagine a world in which oil sells for US$50 a barrel, the United Kingdom is not part of Europe and Ukraine is one of many Russian satellite states. If you're thinking 1970s, then think again and let your mind take you back to the future.

For all three of these scenarios are not a distant memory, but some of the more unusual predictions for 2013 made by some of the world's leading investment banks.

In an effort to ram home the implications of broad economic trends and political developments, analysts from various banks and research houses have come up with extreme case scenarios that could evolve in the coming year.

China features heavily in these outlier predictions, as an acknowledgement of the Middle Kingdom's importance to the world economy is accompanied by anxiety over its slowing economic growth. The predicted consequences of Chinese underperformance ranges from a collapse of the German benchmark stock index, the DAX, to the whole world going back into recession.

Europe also ranks highly with the doomsayers, but 2013 may not be all bad news. While the British might weigh anchor and leave the European Union, the struggling euro zone could soon get a boost from an unexpected source.

After a series of bailouts, Greece owes EU governments billions, but the country could be in for a windfall if it becomes part of an imminent Mediterranean gas boom. In the best case scenario, Greece's future gas receipts would far outstrip its debts.

Europe could soon be receiving green electricity from North Africa, if an ambitious scheme to cover the Sahara with solar panels finally becomes reality.

Some analysts believe that the decline in US oil prices will continue, as new extraction techniques greatly enhance supply, adding to existing stockpiles. A return to oil prices last seen many decades ago would be good news for consumers, and boost the economic recovery in the United States.

Another tonic to the economy might be less appreciated by the beneficiaries. Morgan Stanley posits that former Soviet satellite states could be reintegrated into the Russian orbit, thus lifting economies throughout Eurasia.

fneuhof@thenational.ae