October 2016

• In the coming months, political risk will continue to rise while global growth pursues its deceleration at a slow, but inexorable, rate, reflecting the structural changes engulfing the world economy: ageing, excess savings, insufficient investment, etc. This back and forth between economics and politics fans the flames of populism through a feedback loop: subdued economic growth fuels social discontent and angry politics which in turn exacerbate uncertainty and reinforce weak economic growth.

• The fact that the Walloons’ (a francophone region of just 3.5 million people in southern Belgium) parliament nearly torpedoed the EU-Canada trade agreement harbours multiple lessons: (1) At a time of antiglobalisation and rising protectionism, rejecting trade agreements is a vote winner – political obstacles to major liberalising trade deals are on the increase; (2) it bodes ill for the looming trade negotiation between the EU and the UK; (3) it illustrates how future, inevitable, moves towards greater European integration will be chaotic and marred by sharp discontinuities.

• Global gross debt now amounts to USD152tr, or 225% of the world’s GDP (versus 200% in 2002), two thirds of which is held by the private sector. With interest rates so low, the problem of over-indebtedness may not require immediate attention, but besides being the tinder for future financial crises, it represents one further headwind against a robust and sustained global recovery.

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