An increasingly interconnecting world makes countries vulnerable to events in others. Seven years after the American subprime crisis shook the whole world, global economic shocks keep coming. 2016 witnessed several events that ended up impacting economies all over the world, for good and bad.

Chinese crash 

On January 4 and 7, China's stock market saw a sharp selloff of about 7 percent that quickly sent stocks tumbling globally. From January 4 to 15, China’s stock market fell nearly 18 percent. 

The yuan fell to its lowest level since March 2011 which made Chinese exports more competitive in overseas market and in turn made overseas investments more expensive. 

The Chinese stock market rout sent shock waves across the world, hitting the European and U.S. stocks. The wild swings in global financial markets due to China's market crash proved beyond doubt that China now plays a bigger role in the functioning of the global economy. 

OPEC cut 

For the first time since December 2008—the height of the financial crisis—the Organization of Petroleum Exporting Countries (OPEC) cut its production in November. 

The cut, soon followed by non-OPEC countries such as Russia, helped push oil prices sharply higher. Crude oil jumped more than 5 percent in New York after OPEC agreed to limit production to 33 million barrels a day. 

Though it will brighten the prospects for the energy industry and boost the economies of oil-rich countries, for consumers, however, it will mean higher prices. The slump pushed several oil producing countries such as Brazil and Venezuela into severe recession. Even Saudi Arabia cut back on spending. 

Brexit 

Britain voted to leave the EU in a referendum in June. Now Britain will have to redefine itself after 23 years of EU membership. 

A sharp rise in the value of the U.S. dollar against the euro will adversely affect the U.S .manufacturing sector. This in turn will put additional downward pressure on weak U.S. growth momentum. 

Britain's exit from EU will push capital away from the eurozone and direct it towards safe markets, including the U.S. Treasuries, resulting in strengthening of U.S. dollar— and to Japan. This will further lower market interest rates and raise relative currency values. 

The higher U.S. dollar will trigger pressure on China to float the yuan lower, as it is caught in the divergence between its two largest export markets—the EU and the U.S.

Trump win

U.S. president elect Donald Trump has complained against longstanding trade agreements which he might scrap. The first could be the North American Free Trade Agreement. The devaluation of yuan against U.S. dollar by China has also earned his wrath and he has vowed to punish Beijing for it. He has also promised to tax country’s firms that move jobs overseas. 

He is also planning a new fund that has the potential to boost jobs but could trigger the inflation to shoot up. 

Sanction free Iran 

The nuclear deal between Iran and six world powers removed the sanctions put on the Islamic Republic of Iran. Removal of these sanctions had wide ramifications for global economy. Iran can now increase its revenue from oil exports by $10 billion by next year. 

The European Union has ended restrictions on Iranian trade, shipping and insurance. The United States too will no longer apply its sanctions on Iran's economy, especially on the banking sector. 

Iran's central bank says lifting banking sanctions would allow $30 billion of foreign reserves currently frozen in accounts around the world to be brought back. For India, it means crude oil supplies from Tehran will increase but there will also an adverse impact on India’s farm commodities as Iran now has a wider market to shop.

(Source: Economic Times)