Weekly Risk Outlook

Weekly Risk Outlook

IMF to forecast weakened growth. Eurozone ministers review Greek bailout progress. Turkish president discusses refugees. Moody’s stages conference in Brazil. U.S. House elects next Speaker following Boehner’s resignation. All in the Weekly Risk Outlook.

IMF Releases Economic Forecast, Likely to Show a Slowing Global Economy

On Tuesday, the International Monetary Fund will release its World Economic Outlook, in anticipation of the annual IMF-World Bank conference, held this year in Lima.

The outlook will provide a snapshot of the growth potential of virtually all market economies, and the figures will likely be viewed carefully by investors and market-watchers for any significant changes around the world.

The WEO is likely to forecast lower global growth rates than April’s 3.5% or July’s 3.3% estimates, in no small part due to China’s slowing growth projections.

The report will be followed on Wednesday by the IMF extension of the Global Financial Stability Report, which is likely to expand on its April report and incorporate developments since April: China’s market gyrations, the increasingly stable outlook in Greece, and the economic impact of the surge in refugees from Syria to Europe to name a few.

On Thursday afternoon, IMF Managing Director Christine Lagarde and World Bank President Jim Yong Kim will deliver joint press briefings in Peru, exploring points of collaboration between the two global financial institutions and their respective outlooks for the global economy.

Finally, on Friday Christine Lagarde will speak at an IMF/World Bank panel “Today to 2030”, exploring both short- and medium-term prospects for global markets.

Her comments, in particular those regarding the viability of Greece’s bailout provisions and China’s market developments, should be watched closely by European and Asian market investors.


Eurozone Finance Ministers Discuss Greek Bailout Loans While Greece Debates Terms

On Monday, the finance ministers of the Eurozone will meet in Luxembourg to discuss the steps Greece has taken given the recent parliamentary snap elections towards fulfilling its obligations in exchange for a third major bailout.

Following the discussion, the finance ministers will hold a press conference on the progress made and highlight further areas for the Greek government to address.

On the same day, the Greek parliament will begin a 3-day debate to explore the new Greek government’s economic program, likely focusing in particular on bailout terms. Prime Minister Tsipras will likely speak to lawmakers directly regarding his policies at the debate.

Though Mr. Tsipras will face opposition from the Communists (KKE) and other smaller groups regarding his acceptance of the third bailout terms, the bailout will have broad parliamentary support among remaining Syriza lawmakers as well as some support (passive and otherwise) from the center-right New Democracy, centrist Patomi, and center-left PASOK parties.


Turkish President to Meet with EU Officials to Discuss Refugees

On Monday, Turkey’s President Recep Erdogan will meet with EU officials in Brussels to discuss the EU response to the refugee crisis.

Turkey has been a major recipient of Syrian refugees; current estimates suggest that Turkey currently houses as many as 1.7 million refugees. The country also fulfils a role as a conduit of Syrian refugees to Europe, often through the island of Lesbos 6 km off the coast of Turkey.

President Erdogan is likely to express frustration at the slow progress being made by EU member states in accepting Syrian refugees. In turn, EU officials are likely to convey dismay that Turkey may be allowing Syrian refugees to reach into the EU without hindrance.

After the meeting with EU officials, EU President Donald Tusk will meet with President Erdogan to discuss EU-wide approaches to the crisis. Tusk has traditionally taken a more hands-off approach, arguing in the past for voluntary quotas while EU Commission President Jean-Claude Juncker has pushed for mandatory refugee quotas.

Following these meetings, on Wednesday French President François Hollande and German Chancellor Angela Merkel will jointly address the European Parliament on the topic of the refugee crisis.

This session of German and French presidents will mark the first joint address in nearly 30 years to the European Parliament. Refugees have become high politics.


Moody’s Conference in Brazil as Brazil’s Economy Stands on a Precipice

On Tuesday, Moody’s Investors Service will hold its 17th annual conference in Sao Paulo to discuss Brazil’s economic challenges and opportunities.

Following Brazil’s recent credit downgrades, and amid persistent political challenges, this conference will be watched carefully for any indications that Moody’s intends to lower Brazil’s credit rating any further from its current level of Baa3.

Such a downgrade, in addition to discouraging investment outflows, will likely make reforms of Brazil’s economy even more challenging.

Investors will also gain a practical perspective of the investment environment in Brazil on Wednesday, when Brazil’s National Petroleum Agency intends to auction over 260 offshore and onshore oil blocks in 10 Brazilian states. Several major oil companies, including ExxonMobil, Statoil, and BP are already slated to compete.

While the Brazilian government may be hoping for a boost from this auction, they should not hold their breath. Due in part to the collapse in oil prices, Mexico’s much-hailed privatization of its own oil blocks has been lackluster, and led to a major regrouping on the part of the Mexican energy ministries following disappointing sales. Brazil is in no better position.


U.S. House Elects Speaker Following Boehner’s Surprise Resignation

On Thursday, members of the House of Representatives will elect their next Speaker, to begin her or his term on November 1 2015.

The selection of a new Speaker mid-term is particularly interesting, as House Republicans currently enjoy a majority of a magnitude they have not seen in the lower chamber since the Hoover Administration in 1929.

The dynamic that led to this moment, however, will likely have profound consequences on US policy-making in the months ahead.

Speaker Boehner’s resignation largely came about following a planned conservative rebellion on his leadership should he advance a short-term funding bill that would include appropriations for Planned Parenthood, currently mired in controversy.

Rather than be forced to rely on Democratic votes (or their abstaining) to secure his speakership, Boehner chose to resign.

House Majority Leader Kevin McCarthy is likely to succeed him, though the dynamic that led to Speaker Boehner’s downfall will be as strong, if not stronger, under McCarthy.

This will make policy in a number of must-pass pieces of legislation that much more difficult, including raising the debt ceiling by November 5, reauthorizing the Highway Trust Fund (and finding a way to pay for it), reauthorizing the Export-Import Bank of the United States, and enacting a full spending bill by December 11.

McCarthy’s comments following the Thursday election will be demonstrative of the level of support he can expect to receive from the House conservatives, as well as the strategy he intends to employ with House Democrats, the Senate, and President Obama.


The GRI Weekly Risk Outlook (WRO) provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, the WRO presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.

The Weekly Risk Outlook was produced by GRI analyst Brian Daigle.

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