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These 3 big economies mostly hurt themselves.

Three of the world's top 10 economies are ending the year in worse shape than they started. And they've only got themselves to blame.

Two referendums and a risky currency experiment have left them facing a very uncertain 2017.

These 3 big economies mostly hurt themselves.

Three of the world's top 10 economies are ending the year in worse shape than they started. And they've only got themselves to blame.

Two referendums and a risky currency experiment have left them facing a very uncertain 2017.

1. The United Kingdom

1. The United Kingdom

The first shock of the year came on June 23, when the people of the U.K. voted to leave the European Union.

The "Brexit" referendum had an immediate impact on global markets, sending shares crashing. They soon recovered, but the biggest loser was Britain's Pound.

The pound (GBP) crashed to its lowest level in over 30 years against the dollar. It has steadied since but has still lost 18% of its value, pushing up the price of everyday goods. Inflation will accelerate next year.

But more damaging is the uncertainty the British economy faces in breaking up with its biggest trading partner, and the threat that companies may move operations out of the country.

The U.K. was enjoying one of the fastest rates of growth in the G7. But the economy could slump to its slowest pace of expansion in seven years in 2017.

2. India

2. India

What happens when a country that lives on cash suddenly decides to ban the vast majority of its banknotes?

India was forced to find out on Nov. 8, when Prime Minister Narendra Modi announced that 500 rupee and 1,000 rupee notes would no longer be legal. They would be replaced with new 500 and 2,000 rupee notes.

The shock move caused chaos for millions of people who struggled to get their hands on the new money. Businesses have suffered from the cash crunch, and India's high-flying economy is suffering as a result.

India's 7.3% growth rate, the envy of every major economy, is expected to slow dramatically. The Reserve Bank of India has already cut its growth forecast for the current fiscal year by 0.5%; analysts say the damage could be much more severe than that.

The government says the rupee ban was aimed at combating tax evasion and counterfeit currency, and will benefit the India in the long run. But political opponents question whether the pain is a price worth paying.

3. Italy

3. Italy

Least but not last - On Dec. 4, Italians voted overwhelmingly against constitutional reforms proposed by Prime Minister Matteo Renzi. The reforms were aimed at ending political gridlock and reviving Italy's stagnant economy.

Renzi resigned the next day. The sudden political and economic uncertainty has already claimed one casualty - nervous investors refused to provide the world's oldest bank, Monte dei Paschi di Siena (BMDPF), with the $5 billion it urgently needed to stay afloat.

The Italian government has been forced to step in with a bailout, drawn from a $21 billion rescue fund that will add to the country's huge debt mountain of $2.34 trillion.

Italy's banks are just one lingering headache. The threat of early elections has receded but not gone away. If they happen, populist parties of left and right could ride a wave of public discontent with Europe.

One of them - the Five-Star Movement, founded by comedian Beppe Grillo - could make a Brexit-style referendum on the euro a cornerstone of its campaign.

Analysts say the odds of such a referendum happening are slim, but the political risks for Europe are rising.

 

 

 

 

 

Author: Roger Gain
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