2018 Global Outlook

posted by Nikolai Tagarov on December 21, 2017 - 12:00am


Russia will continue to flex its military muscle, in the Middle East and elsewhere. However, its military resurgence will come at the cost of further economic decline, and therefore due to increasing unpopularity of the ruling elite the Russian state will continue with its repressive policies domestically in order to stymie dissent. It is likely Putin will win the 2018 presidential elections. Ironically, we will continue to observe the (re-)building of the pre-Communist era Russian Empire, with all the sociological, ideological, political and economic implications that this brings. Paradoxically, Putin will continue to act like a Tsar with no apparent heirs who also needs to go through the motions of getting reelected every six years. The question is how long this can be sustained; my answer is: at least through 2018.


UK will proceed with Brexit despite dwindling (in fact now minority) support for leaving the EU. The UK government will not call for a second referendum due to the possible backlash against the idea from hardcore Brexit supporters. In essence, however, it is likely that given the receding tide of nationalism throughout Europe the UK will reach wide-ranging agreements with the EU which will mean changes in the status quo will not be drastic, while UK will be less constrained by Brussels to act unilaterally to develop stronger ties particularly with China but also with the US. The lower threat from immigrants will mean that the divide between new (and conservative) Member States such as Poland, Hungary, etc, and "Old Europe" will be less pronounced. The EU will likely see moderate economic growth in 2018.

Middle East 

While ISIS will be fully driven out of the region, Syria will continue to be unstable and fragmented. The biggest threat to the unity of the state in 2018 will likely come not from ISIS but from the prospect of establishing an autonomous Kurdistan province - a prospect dreaded by both Turkey and Iraq where so far the aspirations for an independent Kurdistan have been quashed. Yet the central government of Syria will probably grant significant concessions to Syrian Kurds as it has no way to exercise effective control over Kurdish territories after being weakened by years of civil war.

Instability focal points in this volatile regions will nevertheless shift from Syria to Lebanon and Saudi Arabia. The young Saudi leader will continue efforts to reduce Iran's influence in the region and reform the country domestically, yet his relative inexperience and crackdowns against powerful domestic opponents will weaken his ability to reach his goals. The (military) resurgence of Russia and (economic) interests of China in the region will act as stabilizing forces which will likely prevent serious conflicts. 


China's economy will continue to grow in 2017, however at a slower pace. Many of the difficult reforms that are badly needed were postponed to 2018 due to the 19th CPC Congress. Monetary policy will tighten and companies will need to deleverage. Investments abroad will slow down a bit and focus on more strategic sectors that support geopolitically motivated initiatives like One Belt One Road. Real estate prices in major cities will stabilize or even decline as mortgage credit will remain tight as well. 


Given Trump's low approval ratings and the ongoing investigation into the Trump campaign's Russia ties, it is difficult to predict whether the Trump administration will be successful in pursuing its stated goals. Regardless of the outcome however, in 2018 the US will continue down the path of relative withdrawal from the world scene, focusing in on itself. In order to try to get reelected in two years' time, in 2018 Trump will be forced to (appear to) act tougher vis-a-vis China and will pursue economic nationalist policies. On the other hand, the Trump administration will likely start implementing large manufacturing and infrastructure investment projects with Chinese funding, eg via the new CIC-Goldman fund.