Blog AIC projections largely on the money

AIC projections largely on the money
Attendees at the 2015 Asian Investment Conference heard from dozens of renowned speakers, who offered a wide range of predictions.

Since the conference, global markets have been rocked by Middle East conflicts, a migrant crisis, China’s slowdown, plunging oil and commodities prices and the worst January for stocks since anyone can remember.

Amid those economic and political shocks, forecasts from the AIC proved remarkably accurate (as we describe in detail below). With that in mind, we hope you will join us at the 2016 AIC on April 5-8 in Hong Kong to hear what presidents, prime ministers, finance ministers, central bankers, economists, Nobel laureates, academics and philanthropists from all parts of the globe have to say about what’s next in the world economy and geopolitics.

So how prescient were the AIC’s experts a year ago? Here are some of the highlights.

Oil

Many forecasters predicted oil would plummet a year ago. But none were more accurate than Dr. Fereidun Fesharaki, Chairman, FACTS Global Energy. Speaking at the AIC, he projected a decline of $5 to $10 per barrel, with perhaps another $5 decline on any agreement that lifted sanctions on Iran.

At the time, U.S. WTI traded at $45.85. More recently, WTI has hit a 12-year low at $31.06 – remarkably close to Fesharaki’s projection. Perhaps we should take note of Fesharaki’s longer-term forecasts. “You may have to wait 15 to 20 years, if ever, to get back to the higher prices.” He added: “Higher prices will only come with a substantial reduction in Saudi output. Then we may get to $80 or $90 a barrel.” 

Or, in the words of Brabeck-Letmathe, Chairman of Nestlé S.A: "We will be running out of water long before we are running out of oil.”

U.S.

Nobel laureate Robert Shiller was right on the money in projecting that U.S. deflationary pressure made rate hikes less probable and that U.S. stocks were “highly priced”.

“From January to January, we had deflation in the United States. So I’m skeptical that they really are going to tighten” in the near term. Shiller said. The Fed did eventually tighten the overnight lending rate, but it came nine months later, and by only a quarter-point from its historic low of zero percent.

Former Dallas Federal Reserve Bank President Richard Fisher compared the U.S. to a racehorse among other major economies. In fact, U.S. GDP growth of 2.4 percent was better than Europe’s and Japan’s. But the “racehorse” did tire down the stretch, with Q3 2015 GDP growth of 2 percent and just 0.7 percent in Q4.

Europe

José Manuel Barroso, former Portuguese Prime Minister correctly predicted moderate growth in the EU.

“As European economic prospects look better, the political situation appears more fragile. As a result of several years of fiscal rigor imposed by many European countries and now the European Central Bank’s implementation of quantitative easing, GDP growth in the EU should be between 1.5 percent and 2 percent this year and higher in 2016.”

EU GDP actually rose by 1.5 percent in 2015.

India

David Mulford, Former U.S. Ambassador to India, got it right on India’s GDP. 

“My view is that India among all the emerging market countries in the next three to five years is going to be the leading grower. India’s going to have a real advantage and I expect it to move back up into the 7-8.5 percent range.”

India actually grew at 7.5 percent in 2015, overtaking China as the world’s fastest growing economy.

Australian dollar

Dong Tao, Chief Economist for Non-Japan Asia, Credit Suisse predicted the Australian dollar would fall to 60 cents against the U.S. dollar, from 78 cents. The Aussie dollar got as low as $ 0.68 in January, 2016.