As the new year rolls in, let us review the financial challenges faced in 2012 and the outlook for the months ahead....Indeed the key economic issues faced over the past year will linger into 2013, yet the pace of progress has been picking up ( cheer up, it's not all that bad!)
- Number one on the agenda would be major Eurozone
concerns, a factor which is key to determining the financial market performance in 2013. As a result of considerable uncertainty, companies remain reluctant to engage in spending, investing and hiring. Officials have gotten together to calm the crisis, nonetheless one can only hope that more concrete initiatives will be put in place to shed some light on the degree of uncertainty currently being experienced.
- Next we must consider the US: Will it be able to overcome the current fiscal cliff? Taking on an optimistic outlook, we can expect growth rates of approximately 2% for 2013.
- Growth from
developed countries is expected to be less this year than historically seen and interest rates are expected to remain low. As for emerging
markets, China, the world's most promising superpower (at the moment) is expected to show growth rates of approximately 7-8%. It is also worthwhile to mention that Africa is becoming an increasingly exciting part of the world, as companies have recognised more and more rising opportunities there.
- Next let's focus on the UK economy: Indeed it has slipped into a difficult recession for the second time, and is yet to emerge with real conviction from the negative impacts of the recession. Austerity measures have helped to maintain market confidence and the ability to hold on
to credit ratings.However the price to pay for this is slower rates of economic growth, higher than expected inflation, sluggish consumer spending and unemployment. Beyond this, the UK's major trading partner (Eurozone) remains in dire straits, thus affecting UK's export sector.The challenge is to now look towards other export markets perhaps? the UK is expecting 1-1.3% growth for 2013.
- Considering companies around the world: they have indeed gone through major transition and restructuring, leading up to the perception of being "leaner and meaner". In the developed world, prospects look promising and profitability is expected to grow by
11% for 2013, permitting investors to benefit and reap benefits of healthy dividends in return for their contributions. As for the little guys who must not be forgotten,SMEs are expected to benefit form looser credit conditions this year. This is a result of higher funding for lending to SME's by the BOE, thus permitting these companies to stay afloat and flourish in the year ahead.
- Banks: the time has now come to seize opportunity of the banking crisis -the good news is that this is the perfect time for banks to reinvent themselves as financially viable and socially responsible institutions. The turmoil of 2012 has created opportunities or the smart players as the withdrawal of competitors has created openings for the remaining survivors. Technology continues to redefine trading, the labour market is identifying genuine talent, shareholders are becoming more realistic about rewards and risks, and regulators are modifying the rules. Despite these chaotic circumstances,we realise that it is this very chaos which equates to opportunity. These circumstances are ideal for restructuring an industry in need of regaining its role as a key player in the economy. it is advisable that banks now look at designing product first and shareholder value second. this opens up the likelihood of generating an ethical, sustainable and added value business. The key challenge remains for investment banking leaders to use this opportunity and re-emerge itself as the cutting edge of the financial services industry.
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