The US dollar could strengthen by as much as 7 per cent this year, according to Citigroup.
It is already trading at a 14- year high, which is having a big impact on regional economies with currencies pegged to the greenback.
While the prediction could represent a boon for millions of residents remitting money overseas, it is not good news for exporters, retailers and the hospitality sector.
Citigroup believes the policies of the Trump administration such as lower taxes, deregulation in energy and banking, and infrastructure spending could lead to a 1 per cent uptick in GDP if they clear Congress.
While the bank says the policies may have a positive impact on the economy, there are also downside risks.
“The global value chain means that simple mathematics does not work,“ said Eduardo Campos, the global head of investments for Citi Private Bank. As an example, not all Chinese products are made in China. “Manufacturing in the US has lost 7.3 million jobs since 1979, but its manufacturing output has more than doubled and 46 million jobs have been created in other parts of the economy. These jobs and industries have been transformed by technology.”
Mr Campos said he expected that the oil price would hold between US$55 and $60 for the year.
That could represent a disincentive to press ahead with much needed diversifiaction efforts, he said.
ascott@thenational.ae
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