While the downfall of Bashar al-Assad may destabilise Syria further, much like Libya post-Gaddafi, AMP’s Shane Oliver told InvestorDaily its limited oil production has kept global oil prices relatively unaffected, remaining steady and even declining over the past week.
“The demise of the Assad regime in Syria is a negative for its allies Russia and Iran and may lead to more instability in Syria as occurred after Gaddafi left Libya, but since it doesn’t produce much oil, I don’t see much impact on global markets,” Oliver said.
According to Russian media, Bashar al-Assad is reportedly in Moscow after rebels seized Damascus over the weekend, ending 50 years of Assad family rule.
In France, the political landscape took a dramatic turn as the government fell following a no-confidence vote in Parliament last week.
Prime Minister Michel Barnier’s failure to pass an austerity budget required under EU rules led to the collapse, exacerbating tensions with far-right opposition. However, President Emmanuel Macron is moving swiftly to appoint a new PM, mitigating fears of a government shutdown.
Oliver explained that in this situation, despite uncertainty, French bond yield spreads have remained stable, and analysts see no signs of eurozone contagion similar to the crisis a decade ago.
“So far, the spread between the French and German bond yields has fallen back into the range it’s been since the mid-year election and there is no sign of contagion to other eurozone members like Italy and Spain,” the chief economist said.
“And compared to the 2010–12 period, growth is stronger, financial conditions are easier and there is more scope for the ECB to ease so it doesn’t look like a re-run of last decade’s eurozone crisis.”
Acknowledging Germany’s “political dramas”, Oliver pointed out that its budget deficit is under 3 per cent of gross domestic product and noted that next year’s election is expected to result in a shift of power back to the centre-right CDU/CSU.
“The uncertainty will likely weigh on French growth though which is another reason to expect relatively aggressive ECB rate cuts – probably down to 1.5 per cent next year,” he said.
South Korea, on the other hand, descended into a comparably worse crisis last week after its president, Yoon Suk-yeol briefly declared martial law amid declining approval ratings. The decision was swiftly overturned by Parliament.
Although political uncertainty in Korea could weigh on the economy, Oliver said the Bank of Korea is poised to intervene if necessary.
“So far, democratic institutions have held and its unlikely to have a major impact beyond political uncertainty weighing on the Korean economy,” Oliver said.
“While Korean shares fell it was only modest and the Bank of Korea is likely to provide any support if needed although it looks unlikely,” he added.
Overall, Oliver believes global developments are unlikely to significantly impact global markets.
“I don’t see a huge impact, to be honest,” he said.
Bitcoin maintains strength
The price of bitcoin has been steadily climbing amid rising global unrest, surpassing the US$100,000 mark last week. It has since remained strong, hovering between US$100,000 and US$102,000 for several days.
As bitcoin hit a new record last week, Nigel Green, CEO of deVere Group, noted that political turbulence in France and South Korea is reigniting global discussions on decentralised, non-government-backed currencies like bitcoin.
“When governments falter or act unpredictably, people inevitably seek alternatives that don’t rely on institutional trust. That’s where decentralised currencies come in,” Green said.
He predicted that the current political turmoil will likely accelerate the adoption of digital currencies across Europe and Asia, in particular.
“The outcomes in both countries will undoubtedly shape global market sentiment and policy decisions in the weeks and months ahead,” Green said.
The price of bitcoin stood at US$101,219.30 at 11am AEST.
