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Forecasting the world in 2021

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A global pandemic was not on FT forecasters’ radar screen — or anyone else’s — one year ago. But it proved, tragically, the defining event of 2020, and will dominate 2021. By pushing the US into recession and sending carbon dioxide emissions tumbling, it confounded two of our more confident forecasts — and only 18 per cent of readers in our online contest predicted these correctly.

UK-EU trade negotiations left everyone guessing to the last, but the late agreement reduced our blushes, meaning we got only five answers wrong — still worse than four the year before. Angela Merkel’s grand coalition did not collapse, Matteo Salvini didn’t return to power in Italy, and Britain’s Labour party beat our expectations in making itself electable. 

The top-scoring readers however, beat our total for a fourth year running. Three tied on 18 correct answers, and the absence of the Tokyo Olympics rendered our tiebreaker moot. Well done to Ravi Chachra of Mumbai, Ulrich Hege of Toulouse, and Daniel Maag of Singapore. Try to beat the FT in 2021 by providing your answers to the 20 questions and tiebreaker below, plus your real name and email. A happy, and healthy, new year. Neil Buckley

FT readers: submit your predictions for 2021

Will the WHO call an end to the public health emergency over Covid-19?

No. The World Health Organization called a Public Health Emergency of International Concern, its highest level of alarm, on January 30 when there were fewer than 100 Covid-19 cases and no deaths outside China. It would be an extraordinary triumph for science, medicine and global politics if the PHEIC were declared over before the end of 2021. Everything would have to go right, from vaccination campaigns to continued social distancing measures. Covid-19 deaths are now running at about 10,000 per day. The toll is almost certain to be much lower by December but not low enough for the pandemic officially to be over. Clive Cookson

Will the majority of the world’s 5bn adult population be vaccinated?

No. While governments and health leaders are seized with the knowledge that only the successful global rollout of the vaccine will halt the spread of Covid-19, the extent of coverage looks set to become yet another point of division between rich and poor countries. Efforts are under way to close the gap. Covax, the global initiative for equitable access to immunisation, has agreements in place to secure almost 2bn doses. But logistical difficulties and probable funding shortfalls mean some needy nations will struggle to implement mass inoculation programmes. Even in the UK and US, vaccine hesitancy — a key issue for 2021 — will blunt the effort to ensure a large majority of citizens is protected. Sarah Neville

Will the Conservatives under Boris Johnson re-establish a clear lead over Labour?

No. Labour under Keir Starmer’s “new management” is showing gains in every age group and with both sexes. But it will not be easy for the opposition to embed a clear lead either, unless UK voters believe negative effects both of the Brexit outcome and of the pandemic are the government’s fault. Pundits and pollsters debate this — there is a suspicion that, despite all the incompetence, the Covid challenge is seen as one that would have confounded any prime minister. Local and mayoral elections in May will test whether the public’s patience has run out. Miranda Green

Will there be an independence referendum in Scotland?

No, not next year. But there will be a constitutional crisis, if as is likely, the Scottish National party wins a majority in the Scottish parliamentary elections, fuelling demands for a new vote. Only Westminster can grant a legal poll and Boris Johnson will refuse at first. Given the desire to rejoin the EU, SNP leader Nicola Sturgeon is resisting demands to hold an illegal poll so one of the big stories of 2021 will be her efforts to ratchet up the political pressure for a new vote in the next two to three years. Robert Shrimsley

Will the Greens be in Germany’s next governing coalition?

Yes. No coalition after federal elections on September 26 is plausible without the Greens. A tie-up with the left might be more comfortable, but they will fall short of a majority. So the now centrist Greens, with charismatic co-leader Robert Habeck, will team up with the Christian Democrats. The CDU will soon have to make do without its popular chancellor Angela Merkel, who steps down at the election. It will choose Armin Laschet as next party leader. But when his ratings slide, it will back the more compelling and Green-friendly Bavarian premier Markus Söder to lead the centre-right campaign. Ben Hall

Will Brussels charge a country with rule of law breaches in the use of EU funds?

No. The European Commission first needs to outline guidelines on how to trigger the new provision in the EU budget, which allows it to cut or freeze funds if rule-of-law breaches “directly” affect the use of the money. It will not apply the mechanism until the European Court of Justice has ruled on its legality. Some hope the court could fast-track its decision if it is a matter of urgency. However, a ruling will probably take several months to over a year to materialise. This would give Viktor Orban, Hungary’s illiberal prime minister — and primary target of the rule of law provision — ample time to concoct a defence ahead of national parliamentary elections in 2022. Anne-Sylvaine Chassany

Will Joe Biden be a lame duck president?

No. Mr Biden will find it hard to get big reforms past a Republican-controlled Senate. But he will have plenty of leeway to act in foreign policy and via executive action, such as rejoining the Paris deal on climate change, ending construction of the US-Mexico wall and creating a coherent federal policy to tackle the Covid pandemic. If he is lucky he will peel off a couple of Republican votes that he would need to push through the $2tn economic stimulus to “build back better”. But don’t count on it. Ed Luce

Will the US and China reach a trade deal?

No. While the world will see a much more conciliatory tone between the incoming Biden administration and Beijing, none of the fundamental issues between the two countries — from WTO violations to labour and environmental standards to the rules for Big Tech and the digital economy — are likely to be resolved. Mr Biden cannot afford to look soft on the Middle Kingdom for fear of losing swing state support before midterm elections. And China, under President Xi Jinping, has announced it wants to be independent of US technology and supply chains by 2035. The “one world, two systems” problem will prevail. Rana Foroohar

Will large-scale demonstrations erupt again in Hong Kong against China’s authority?

No. China’s imposition of the national security law this year has changed the calculus of would-be demonstrators in Hong Kong. Sporadic protests at Beijing’s toughened regime in the territory may erupt from time to time in 2021, but it is hard to imagine these becoming large and sustained. The new law criminalises acts of “secession, subversion, terrorism and collusion” and provides for sentences of up to life imprisonment. Police are also much quicker to pounce on any sign of unrest. James Kynge

Will India’s economy return to its pre-Covid size?

Yes. India was hit hard by a stringent coronavirus lockdown. Its gross domestic product suffered a historic 24 per cent contraction year on year in the April to June quarter. The economy is estimated to have contracted by as much as 9 per cent in 2020, but is forecast to recover those losses and grow by about 10 per cent next year. The recovery, however, has been accompanied by tremendous dislocation, with larger, better-capitalised companies gaining market share at the expense of mom-and-pop businesses. Despite strong headline numbers, many households and small businesses will still be struggling, a probable drag on longer-term growth. Amy Kazmin

Will Nicolás Maduro hold on to power in Venezuela?

Yes. Despite leading his country into one of the world’s worst economic crises ever seen in peacetime, with GDP contracting 75 per cent in five years, Mr Maduro has tightened his grip by taking control of Venezuela’s parliament in a rigged election. Opposition leader Juan Guaidó has lost credibility after failing to dislodge Mr Maduro and no longer presents a serious threat. With Venezuela’s international backers — Russia, China, Iran and Cuba — solidly behind Mr Maduro, his only real worry is a palace coup. That is why he has a large and well-trained team of Cuban bodyguards. Michael Stott

Will the US rejoin the 2015 Iran nuclear deal?

Yes. President-elect Joe Biden says Washington will rejoin the accord if Iran returns to “full compliance”. Hassan Rouhani, Iran’s president, says Tehran will reduce its nuclear activity in-line with the accord if US sanctions are lifted. Both have political motivation to make it happen. Mr Rouhani was an architect of the deal and its fate will determine his legacy. Many in Mr Biden’s team negotiated the accord and will want to reverse Donald Trump’s decision to abandon it. But there are many potential stumbling blocks. And if a hardliner wins Iran’s June presidential election — as expected — it would be even more complicated. Andrew England

Will Ethiopia’s Abiy Ahmed be re-elected?

Yes, but it will be touch and go. Abiy Ahmed has pledged to hold elections in 2021. An argument over postponement because of Covid sparked a rupture with the Tigray People’s Liberation Front, which had dominated for 27 years and fashioned two decades of near double-digit growth. Mr Abiy sent troops into Tigray to quell rebellion, but now faces discontent from other regions seeking greater autonomy. Memories of the prime minister’s 2019 Nobel Peace Prize and initial adulation are fading. But odds are he will survive and press on with his vision of a liberal economy and unitary state. David Pilling

Will US boardrooms become much less white?

No. America’s racial reckoning spread to its boardrooms this year, as campaigners told directors who pledged to do more to address the country’s inequities to look in the mirror. Just 12.5 per cent of Russell 3000 directors come from under-represented ethnic and racial groups, according to Institutional Shareholder Services — a fraction of the 40 per cent of Americans who count as ethnic minorities. Nasdaq, California and several investors are now pressing for greater diversity. Could the figure rise to 15 per cent in 2021? Don’t hold your breath. Change will be faster than before but slower than many hope. Andrew Edgecliffe-Johnson

Will 2021 be a turning point for electric cars?

Yes. There have been false dawns, with sales of electric vehicles in China surging and falling along with subsidies. But EVs have broken through in Germany and Scandinavia as diesel fades. Morgan Stanley predicts global EV sales will rise by more than 50 per cent in 2021. This will happen, with sales nearing 5 per cent of the total from the International Energy Agency’s estimate of 3.2 per cent in 2020. John Gapper

Will the combined stock market value of the five biggest US tech companies top $8tn?

Yes. After their combined value more than doubled in two years, to $7tn, and with regulators circling, this might seem to be the time to move out of Big Tech. But the five — Apple, Microsoft, Amazon, Alphabet and Facebook — have ridden out the crisis in better shape than most. Amazon’s Jeff Bezos has seen his fortune swell. The additional $160bn in combined revenues the five are expected to generate next year, or an increase of 13 per cent, will shine as the world struggles to get past the pandemic. With a surplus of cash looking for a home, such assured growth at scale will be hard for investors to resist. Richard Waters

Will more than half of European office workers be back in the office?

Yes. Many office drones liked working from home in lockdown but for those in cramped housing, or with home-schooling obligations, life was not so rosy. Morgan Stanley’s regular surveys of workers in five European countries indicated 28 to 30 per cent of office staff did not work from home at all after the summer. A further 11 to 14 per cent did not want to in future. A majority of staff want to work at least one day a week from home — and they should have that choice — but, with vaccines available, at least half will return to the office for more than two days out of five. A few may even learn to enjoy it again. Andrew Hill

Will the S&P 500 finish above 4,000?

Yes. The global benchmark of investors’ confidence had a great run in 2020, thanks to the largesse of central banks and governments, wrapping up the year with a gain of about 15 per cent. The rollout of vaccines means stocks that had not recovered so well since March — think energy and financials — have scope to catch up, while it is hard to imagine a serious hit to the star tech performers. That makes a 9 per cent gain from current levels sound achievable. The main risks are inflation that pushes up bond yields, premature signalling from policymakers that support could be withdrawn, or a serious regulatory hit on tech. Katie Martin

Will global carbon emissions return to pre-pandemic levels?

Yes. Emissions plunged by an estimated 7 per cent in 2020 after Covid-19 sent the global economy into a coma, the biggest annual fall since the second world war. But daily emissions are already edging back to what they were in late 2019, not least in China, which accounts for more than a quarter of global emissions. The EU wants a green recovery but the stimulus plans in other large economies are still skewed towards fossil-fuelled sectors. This suggests emissions will rebound as they did after the 2008 financial crisis, despite the pledges countries make in the run-up to November’s COP26 UN climate summit in Glasgow. Pilita Clark

Will oil prices stay above $50 a barrel?

Yes. The oil market has been given a boost amid the rollout of mass vaccination programmes. But after months of lockdowns and travel bans that collapsed consumption and prices, can this optimism hold? As the global economy rebounds, consumption will pick up. This may offset any additional barrels coming from Opec, Russia and allied partners, which enacted record production cuts. Their alliance is looking fragile, but the worst of all scenarios would be any plan to unleash millions of barrels unchecked. Keen to avoid another plunge in prices, it is more likely that any tapering will match any demand rebound. Anjli Raval

Tiebreaker: What will Tesla’s market value be at the year-end?





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Australia’s treasurer warns global stimulus threatens financial stability

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Australia has warned that unprecedented global stimulus efforts during the coronavirus pandemic are creating financial stability risks that will only intensify when interest rates inevitably rise.

Canberra has also defended tough new foreign investment rules that have led to a collapse in Chinese investment, arguing the number of proposed deals motivated by strategic, rather than purely commercial gain, was increasing.

Josh Frydenberg, Australia’s treasurer, said the Pacific nation was in a strong economic position as its net debt to gross domestic product was about half that of other advanced economies, even as it begins unwinding fiscal stimulus.

“There is no doubt elevated debt levels will create challenges for many countries. While global interest rates are low those debt levels can be serviceable — but there will be a time when the monetary policy settings change,” he told the Financial Times.

Frydenberg’s comments on the risks posed by global stimulus followed a similar warning delivered last week by Peter Costello, a close political ally and former Australia treasurer.

Australia will be among the first advanced economies to taper off Covid-19 fiscal stimulus with the closure of its A$90bn (US$70bn) JobKeeper wage subsidy scheme this month.

Canberra has argued that the recovery is already under way, citing a fall in unemployment to 6.4 per cent in January and a 3.3 per cent economic expansion in the three months to September last year.

Frydenberg, who counts Margaret Thatcher and Ronald Reagan among his role models, said the government’s A$250bn stimulus was required to stabilise the economy during the pandemic. But he said JobKeeper, which supported 3.6m workers at its peak, was no longer needed as the recovery could be supported by tax cuts, which were announced last year.

Asked if he thought the economic policies of Thatcher and Reagan were still relevant, he said: “[Reagan and Thatcher] achieved a lot when they were in office and they were committed to lower taxes. They were committed to cutting regulation and that’s certainly what I’ve been committed to as well.”

But trade unions and businesses that are still suffering as a result of border closures and restrictions, particularly in the tourism and entertainment sectors, have warned that the scheme’s closure will dent the economy.

“JobKeeper should be extended for those businesses that are still affected by coronavirus. [Through] no fault of their own, they are suffering that downturn,” said Sally McManus, secretary of the Australian Council of Trade Unions, last week. “And we say that because that will save jobs.”

Josh Frydenberg, Australia’s treasurer, is a rising star in the country’s conservative government and is tipped as a future prime minister © AP

Frydenberg, who was the architect of foreign investment rules aimed at countering rising Chinese influence, said he made no apologies for putting “national interest” at the heart of Australia’s investment policies.

Chinese investment fell 61 per cent last year to A$1bn, down from A$2.6bn in 2019 and a peak in 2016 of A$16.5bn, data showed. Frydenberg was instrumental in blocking two potential deals: China Mengniu’s A$600m bid for Japan-owned Lion Dairy and China State Construction Engineering Corp’s A$300m bid for Probuild, a South Africa-owned construction company.

“We absolutely reserve the right to make decisions around foreign investment based on national interest and having put in place an explicit national security test allows us to do that,” he said.

“Increasingly we’ve seen foreign investment proposals that have been motivated not by purely commercial gains but more strategic ones. When those foreign investment proposals potentially compromise the national interest, then we reserve the right to say no.”

Frydenberg said Australia was not alone in tightening its rules, noting that other countries shared Canberra’s views on national sovereignty and foreign investment.

“Obviously we have had some challenges with China,” he said when asked about Beijing’s imposition of trade sanctions on a range of Australia’s exports following Canberra’s call last year for an inquiry into the origins of Covid-19 in Wuhan.

Frydenberg insisted that Australian ministers were prepared to sit down with their Chinese counterparts to discuss the bilateral relationship but only on a “no conditions attached” basis.

“It is a mutually beneficial trading relationship — we supply the bulk of their iron ore and that iron ore has helped underpin their economic growth,” he said.

Frydenberg is a rising star in Australia’s conservative government and is tipped as a future prime minister.

Last week, he shot to global attention following several days of negotiation with Facebook’s Mark Zuckerberg over the social media company’s decision to block news on its platforms in Australia in response to a law forcing it to pay news publishers.

On Friday, Facebook “refriended Australia” and returned news to its Australian platform following amendments that may make it easier for the company to avoid the toughest elements of the law.

“Trying to negotiate with these guys is a bit like playing chess against a chess master,” said Frydenberg, who joked that he spoke to Zuckerberg more than his own wife last week.

“The reality is they are massive companies with huge balance sheets and global reach. If this was easy other countries would have done it [made Big Tech pay for news] long ago.” 



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Ecuador’s exporters caught between US and China after debt deal

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Exporters in Ecuador are worried that their all-important trade with China will suffer as a result of a controversial agreement the US says is aimed at shutting China out of the South American country’s 5G telecoms network.

The agreement, signed by the US International Development Finance Corporation (DFC) and the Ecuadorean government just days before Donald Trump left office in January, envisages the US buying oil and infrastructure assets in Ecuador on the understanding Quito uses the proceeds to pay off its debt to China.

It also obliges Ecuador to sign up to what the Trump administration called the “Clean Network” — a state department initiative designed to ensure that nations exclude Chinese telecoms services and equipment providers as they build out their high-speed 5G mobile networks.

Adam Boehler, the recently departed chief executive of DFC, has described the deal as a “novel model” to eject China from the Latin American nation.

But it has caused unease in Ecuador, which has become increasingly reliant on exports to China.

“The announcement has generated a lot of inquiries and a lot of doubts,” said Gustavo Cáceres, head of the Ecuadorean-China Chamber of Commerce (CCECH). “We hope our authorities handle this in the best way possible so as not to give the impression that we’re turning our backs on China.”

One of the smallest countries in South America, Ecuador has traditionally exported primarily to the US and Europe, but China is fast catching up. Its share of Ecuador’s exports jumped from 3.9 per cent in 2015 to 15.8 per cent. In the same period, the US’s share fell from 39.4 per cent to 23.7 per cent.

The Chinese buy oil, shrimp, bananas, cut flowers, cacao and timber from Ecuador. Last year, despite the coronavirus pandemic, Ecuador’s exports to China grew more than 10 per cent and, for the first time, the country boasted a trade surplus with Beijing.

The shrimp industry has become particularly important. Since 2016, Ecuador’s shrimp exports worldwide have jumped 86 per cent. The nation of just 17.4m people is now the largest exporter of shrimp in the world, having overtaken India last year, when it exported 676,000 metric tonnes of the crustaceans in trade worth $3.6bn. After oil, shrimp were the country’s most lucrative export commodity.

Over half of that went to China, which, with its expanding middle class, is acquiring a taste for seafood once seen as a luxury.

“China will remain our main market,” forecast José Antonio Camposano, president of Ecuador’s National Chamber of Aquaculture (CNA), which oversees the industry. “We need a smart approach to China. A market of 1.4bn people with the acquisitive power that the Chinese have? I’m a businessman, how can I say no to that?”

The CNA was sufficiently worried by Ecuador’s agreement with the US that it sent a three-page letter to Ecuador’s president Lenin Moreno reminding him of China’s buying power.

While the letter did not mention the DFC deal directly, it urged Moreno — who in his four years in power has shifted Ecuador’s axis away from Beijing and towards Washington, reviving relations with the IMF and renegotiating the country’s debt to bondholders — “to reinforce with senior Chinese leaders the point that the excellent relationship between Ecuador and China remains intact”.

Freshly caught shrimp being packed into containers in Ecuador in 2011
Ecuador’s shrimp industry has fed a growing appetite among China’s expanding middle class © Bloomberg

China’s ambassador to Ecuador, Chen Guoyou, said he was unconcerned by the DFC deal and described media reports that it excluded Chinese companies from Ecuador’s telecoms network as “over-interpretation and gratuitous assumption”.

“China respects the sovereign and independent decision of the Ecuadorean government to develop pragmatic, balanced and diverse partnerships with other countries,” he told the Financial Times in an email.

Responding to his comments, one of the former Trump administration officials who negotiated the deal said it had been made explicitly clear in the text that the agreement was contingent on the country participating in the “Clean Network” — which would prevent it from including Huawei or any other Chinese company in its telecoms network.

The future of the deal, and indeed Ecuador’s future relations with China and the US, will depend in part on the outcome of the country’s presidential election on April 11. It pits leftwing economist Andrés Arauz against Guillermo Lasso, a conservative former banker. 

Arauz has the backing of Rafael Correa who took Ecuador out of the US’s orbit and pushed it towards China while serving as president from 2007 until 2017. He broke off relations with Washington’s financial institutions and signed a series of loans-for-oil deals with the Chinese. If Arauz wins the election he is likely to seek support from Beijing and might rip up the DFC agreement, particularly now Trump is no longer in office.

In contrast, Lasso told the FT previously the deal was “a pleasant surprise” and “good news” for Ecuador.

“It’s clear that the US is our principal ally and in my government I would look for an even closer alliance with the US,” he said.



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Brazil virus variant found to evade natural immunity

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The P.1 Covid-19 variant that originated in Brazil and has spread to more than 25 countries is around twice as transmissible as some other strains and is more likely to evade the natural immunity people usually develop from prior infection, according to a new international study.

The research, conducted by a UK-Brazilian team of researchers from institutions including Oxford university, Imperial College London, the University of São Paulo, found that the P.1 variant was between 1.4 and 2.2 times more transmissible than other variants circulating in Brazil. 

It was also “able to evade 25-61 per cent of protective immunity elicited by previous infection” with any earlier variant, the researchers found, in a sign that current vaccines could also be less effective against it.

International concern about the P.1 variant has escalated recently, with more than 25 countries detecting the variant, including Belgium, Sweden and the UK, which has identified six cases.

The scientists are expected to release a paper describing the research on Tuesday. Dr Nuno Faria, the lead author, did not immediately respond to a request for comment. The study has not yet been peer reviewed.

The researchers have dated the emergence of the P.1 variant to November 6, 2020, around one month before cases began to surge for a second time in the Brazilian city of Manaus. They found that the proportion of cases classified as P.1 in Manaus increased from zero to 87 per cent in the space of 7 weeks. 

The paper concluded: “Our results further show that natural immunity waning alone is unlikely to explain the observed dynamics in Manaus, with support for P.1 possessing altered epidemiological characteristics.”

“Studies to evaluate real-world vaccine efficacy in response to P.1 are urgently needed,” it added.

The researchers also found that infections were 10 to 80 per cent more likely to result in death in Manaus after the emergence of P.1. However, the authors cautioned that it was not possible to determine whether this meant the variant was more lethal or whether it was a result of increased strain on the city’s healthcare system, or a combination of both. 

The P.1 variant has over 17 mutations, which alter its genetic sequence from the virus originally identified in Wuhan, including 3 key changes to the spike protein that it uses to enter human cells.

Researchers in Brazil have been using genetic sequencing technology developed by Oxford Nanopore in the UK to identify and track the variant. The technology was first used in Brazil during the Zika outbreak in 2015.

Dr Leila Luheshi, director of applied and clinical markets at Oxford Nanopore, told the Financial Times that while the B.1.1.7 variant in the UK has similar properties of high transmissibility to P.1 — it is thought to be around 1.5 times as transmissible as variants that preceded it — there was no evidence to date that it evaded past natural immunity in the same way. Studies so far have also shown that current vaccines retain their efficacy against B.1.1.7.

Luheshi said that the concern with P.1 is that “because it has these mutations around the spike . . . the hypothesis is that the vaccine will be less effective.” But she added that there is not yet definitive evidence to support this theory. 



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