Although the U.S. and Chinese economies are mending, and European leaders believe they have their three-year debt crisis under control, it would be premature to declare “all clear” from the global financial turmoil. In fact, several leading global trends in 2013 will involve jockeying for position to overcome low growth. Moreover, with nations at different stages of recovery, greater competition and little coordination should be expected.

First, fiscal tightening in advanced countries will continue to suppress growth, though unhappy voters in Europe may alter the conditions and methods of the forced austerity when they go to the polls in Italy and Germany this year. In the U.S. more pitched political battles will be fought over what combination of taxes and spending cuts should be applied to avoid their own debt crisis. Under the circumstances, the Bank of Japan will join its counterparts in Europe and the U.S. in aggressive quantitative easing, or government bonds, to suppress interest rates and fan inflation in the hopes that it will stimulate household spending and business investment.

In the second trend, a side effect to quantitative easing will see the euro, yen and U.S. dollar weaken and foreign capital pour into developing countries, where bond yields are higher. Expect to hear complaints from China, Brazil and other leading developing economies about how monetary easing is increasing volatility in their financial markets and strengthening their currencies, denting their exports’ price competitiveness.

The third trend will see tightened regulations on global companies. Financially-strapped advanced governments, heeding negative public opinion about soft taxation of global companies, are reexamining corporate tax policies. To wit, the global coffee giant Starbucks volunteered to pay U.S. $16 million a year more 2013-2014 in the U.K. to quell accusations of tax dodging practices. Oversight of price fixing, monopolistic status and patent protection also will probably be stiffened. Emerging economies also have jumped on the bandwagon and taken steps to protect their domestic industries. As such, the stricter regulations on global firms will emerge as a new management risk.

The fourth trend will also involve turf competition. It will be between the G2 ― China and the U.S. ― concerning trade in Asia, which has enjoyed modest growth and forecast to show comparatively high growth. This will come in the form of strong US promotion of the Trans-Pacific Partnership and China’s counterweight with the Regional Comprehensive Economic Partnership.

The war for leadership will also intensify in mobile devices. Apple and Google are expanding their lineup by launching new mobile devices and TVs. Top service firms such as Facebook and Amazon have optimized their products in their own brand of affordable devices, and Chinese firms’ increasing price competitiveness make them more formidable rivals against multinationals.

The new renewable energy industry, which has received much attention as a growth driver since the financial crisis, will face difficulties this year. The international movement on climate change has weakened with Japan and Canada amongst others withdrawing from the Kyoto Protocol last year. Also major economies are pulling back policy support for the industry due to the long-term financial commitment and U.S. concerns over global oil supplies are receding with non-traditional drilling methods in U.S. states.

The competition to secure investment in the manufacturing sector will also become heated in both developed and emerging economies. The EU and U.S. are looking to strengthen their manufacturing sectors through new policies, and advanced and emerging economies are expanding or establishing special industrial zones.

The instability in Northeast Asia, which endured many difficulties related to territorial disputes last year, is expected to heighten. In Japan, the Liberal Democratic Party rose to power in December and its nationalistic bent will test the new leadership in China and Korea. But the governments will likely search for ways to ease tensions by exercising discretion and practicality.

The political instability in the Middle East, also known as the world’s powder house, will worsen. Iran’s nuclear issue is the biggest factor influencing global oil prices. It will not agree to an inspection of its nuclear facilities in the lead up to the elections slated for June this year, which will mean that the negotiations for disarmament will be delayed further. The civil war in Syria and the conflict between Israel and Palestine will compound the instability in the region. As a result, although the demand for petroleum will decline due to slow growth, prices will not erode significantly because of the added risk premium.

Finally, conflict surrounding the burden sharing of fiscal austerity will be exacerbated. The discord between the middle class, whose pensions and pay will decrease with the belt tightening, and the wealthy, whose taxes will rise, will become more blatant. Furthermore, tension will persist among countries mired in government debt and those providing support, while financially healthy local governments will collide with their central governments over revenue contributions and cost-sharing. 

By Park Hyun-soo

The writer is a research fellow at Samsung Economic Research Institute. This article was contributed by SERI. ― Ed.