Charting the Global Economy: Assad’s Fall Adds to Middle East Instability

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(Bloomberg) — The overthrow of Bashar al-Assad’s government has added a new source of instability to the Middle East, as Türkiye asserts itself as the key player in shaping Syria’s future.

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Turkey has a strong incentive to help build a stable and peaceful Syria from the ruins of the Assad regime, not least because the country hosts at least 3 million refugees from its southern neighbour. Turkish companies will also benefit if post-war reconstruction begins.

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At the same time, the cost of money has become cheaper in the world’s largest economies. The European Central Bank, the Swiss National Bank and the Bank of Canada cut interest rates ahead of an expected cut by the Federal Reserve next week.

Here are some charts featured on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:

Europe and the Middle East

The government of Syrian President Bashar al-Assad fell after the stunning progress made by opposition groups. The overthrow of the long-time ruler would send shock waves through the Middle East and would be a major blow to Russia and Iran, his main foreign backers.

The European Central Bank cut interest rates for the third straight meeting, signaling further cuts next year as inflation approaches 2% and the economy struggles. In a sign of its change in position, the ECB statement dropped wording saying policy would remain “adequately restrictive” for as long as necessary.

The Swiss National Bank made a larger-than-expected interest rate cut of 50 basis points, a move that may help stem gains in the franc. The central bank’s biggest cut of the current session amounts to a show of force in Martin Schlegel’s first decision as president, aimed at destabilizing traders who have invested their money in the franc in recognition of its traditional role as a safe haven in times of geopolitical stress.

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world

Kristalina Georgieva’s surprise and unusual diplomatic mission highlighted the International Monetary Fund’s sense of urgency about preserving stability in the Middle East, long before this week’s events in Syria demonstrated the fragility of its governments. The rulers of economies that have seen precious little gains in living standards since the outbreak of the Arab Spring 15 years ago are looking with concern at another fire burning in a region already reeling from conflict in Gaza and turmoil in the Red Sea.

For next year, Bloomberg Economics forecasts global growth of 3.1%, unchanged from 2024. Inflation is set to slow to 3.4% from 6%, with readings in the United States and other advanced economies falling to the 2% set by central banks. Targeted for a long time.

Outside of the European Central Bank, the Bank of Canada and the Swiss National Bank, Australia’s central bank left borrowing costs unchanged and acknowledged it had gained some confidence that inflation was moving lower. Uzbekistan and Peru also kept interest rates steady. Brazil raised interest rates a full percentage point and promised more to tame inflation expectations, while Armenia and Denmark cut interest rates.

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United States and Canada

Consumer prices rose at a strong pace in November in line with expectations, boosting expectations that the Federal Reserve will cut interest rates next week. Shelter costs, one of the most persistent sources of inflation in recent years, declined compared to the previous month.

The Bank of Canada made its second consecutive big interest rate cut and signaled that policymakers are willing to slow down monetary easing. In the space of five meetings in about six months, the Bank of Canada cut borrowing costs by 175 basis points, becoming one of the most aggressive rate-cutters among central banks in major economies.

Experts say a 25% tariff on oil and gas from the U.S.’s two largest trading partners would lead to higher gasoline prices in the Midwest, increase electricity costs along the U.S. coasts, and hurt the profitability of U.S. refineries, among other impacts. While tariffs could be devastating in any market, they threaten to be particularly disruptive to a North American energy industry that has been closely integrated for decades and already largely favors U.S. interests.

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US economic indicators can move global markets trillions of dollars at a time. The agencies that collect and publish these statistics were asking for an additional few million dollars, in order to preserve the integrity of the most important numbers in the financial world. Now they face an even tougher battle to get it, as Donald Trump returns to Washington with a plan to trim the federal bureaucracy.

Asia

China’s top leaders signaled bolder economic support next year using their most direct language on stimulus in years, as Beijing prepares for a trade war when Donald Trump takes office. The Politburo also pledged a “more proactive” fiscal policy at its monthly meeting, raising expectations that Beijing will widen the fiscal deficit from 3% at the annual parliamentary session in March.

South Korea faces greater downside economic risks as it tries to mitigate the impact of the turmoil caused by last week’s declaration of martial law on its currency, the South Korean Finance Minister said on Wednesday.

Emerging markets

Brazil’s central bank raised its key interest rate by one percentage point and surprised investors by promising two more rate hikes of the same size, its strongest move yet to restore investor confidence and tame inflation expectations driven by public spending and a hot economy.

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Mexico’s headline inflation rate slowed slightly more than expected in November, raising the prospect of a fourth straight interest rate cut at the central bank’s meeting next week.

South African retail sales unexpectedly rose to their highest level in more than two years in October and are expected to continue to advance, boding well for the economy.

—With assistance from Tom Orlik (economist), Beryl Ackman, Bastian Benrath-Wright, Maria Eloisa Capurro, Sam Dagher, Katya Dimitrieva, Elizabeth Elkin, Selcan Hakaoglu, Eric Hertzberg, Lucia Kasai, Sam Kim, Yujing Liu, Ian Marlowe, Abeer. Abu Omar, Zoe Schneeweiss, Omar Tamu, Randy Thanthong Knight, Robert Tuttle, Monique Vanek, Alex Vasquez, and Josh Xiao.

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