FX.co ★ 9 shocking predictions from Saxo Bank for 2020

World economy to see stagflation

Analysts at Saxo Bank believe that the US authorities will have to increase repeatedly the budget deficit to finance new spending of Donald Trump’s administration. They suppose that US inflation will rise sharply due to the implementation of more stimulus measures. If the Fed keeps the interest rate at an extremely low level, the US dollar is likely to devalue around the world.

ECB to hike its key rate

Saxo Bank experts assume that the ECB may reverse the direction of monetary policy, abandoning the idea of ultra-low rates. It is possible that at the beginning of 2020, new ECB President Christine Lagarde will announce that monetary policy has run out of tools. As a result, the long-term negative interest rate can hurt the banking sector in Europe. In order to encourage European countries to move to fiscal stimulus, the regulator will change the stance on the monetary policy and cut its key rate to zero.

Green energy to take back seat

In 2020, green energy may give way to oil and gas companies due to a sharp decline in investment. OPEC countries and Russia, seeing a slowdown in shale oil output growth in the US, will significantly reduce their own oil production. Economists at Saxo Bank think that this tendency will catch market participants off guard and the price of Brent oil will return to $90 per barrel. However, green energy will see a new trend: in 2020, nickel batteries for electric vehicles will gain popularity over cobalt ones. That is why Nickel will be in high demand. It is quite beneficial for Russia as the country has large reserves of Nickel.

Trump to introduce America First Tax

According to Saxo Bank analysts, Donald Trump's protectionist policy may lead to the implementation of the America First Tax. The new tax will restructure the entire US tax system in order to stimulate domestic production. Saxo Bank believes that the White House will roll off all the tariffs and impose a tax of 25% on all gross revenue received by American companies from production abroad.

Sweden to suffer from its migration policy

The tolerance of the Swedish authorities to migrants has been praised among many northern countries. However, in November 2019, Denmark closed the border with Sweden due to the high crime rate in the neighboring country. This has happened the first time since the 1950s. In 2018, migrant criminals carried out 160 terrorist attacks and several murders. According to opinion polls, 25% of the Swedish population is against migrants from southern countries. In 2020, the country may face recession, Saxo Bank surmises.

Democrats to win 2020 election

According to analysts at Saxo Bank, Donald Trump won the election because the majority of his voters were elderly white Americans. However, now their number is decreasing, and people from 20 to 40 years represent the majority. They are the people of liberal views. What is more, the Democrats have the support of millennials and the oldest of “generation Z”. They stand against inequality, injustice, and climate change. President Trump is well-known as a climate change denier, and thus these two big groups are unlikely to give him their votes. Saxo Bank thinks that the Democrats will tighten control of the House of Representatives and take the lead in the Senate.

South Africa to face large default

In 2020, the prospects of South Africa’s economy are rather gloomy. The country's economy depends on the state-owned electric company ESKOM and its massive debt of 9% of GDP. ESKOM’s revenue does not cover operating expenses due to the extremely low solvency of the population. In 2020, the authorities of South Africa will increase investment in the company which will lead to a sharp growth of the budget deficit. The national debt of the country will exceed 50% of GDP. Foreign investors will stop investing, the national currency will rapidly sink, and the country will be on the verge of default.

Hungary to leave EU

Hungary has been a member of the EU since 2004. However, in 2020, things may change. The EU may stop cooperation with the country because of restrictive measures of local authorities, threatening the independence of the press, the court, science, minorities, and human rights activists. The situation is aggravated by the fact that each side has its own view on these issues. As a result, financial assistance from the European Union will be reduced to zero. The Hungarian currency will fall sharply to 375 forints per 1 euro. Now, 1 euro costs 330 forints.

Asia to introduce new reserve currency

Next year, the Asian Infrastructure Investment Bank (AIIB) may launch a new reserve currency to shift away from the US dollar. Asian countries may agree to transfer all regional financial operations to the new currency. If the country succeeds in its endeavor, the greenback will weaken by 20%. In 2020, the US dollar may also dip by 30% against gold. As a result, the price of the precious metal will rise to $2,000 per 1 ounce.