Egypt: low inflation to elicit IMF call for rate cuts Egypt’s September inflation reading will be closely watched next week as there is a good chance that it will prompt the IMF to give the central bank the green light for further interest rate cuts. A …
8th October 2020
Quebec went further with its restrictions than we expected this week, by completely closing restaurants and bars in its two largest metropolitan areas for the next month. Nevertheless, even if other provinces follow suit, such moves would slow the …
2nd October 2020
The news that President Donald Trump has tested positive for coronavirus has raised the odds of not only Joe Biden winning in November, but of the Democrats sweeping Congress too. Those braced for an October surprise did not have to wait long this …
BCRA heading in the right direction Argentina’s central bank (BCRA) announced a new monetary policy strategy in which it will allow a ‘managed float’ of the peso. It’s a promising step in the right direction, and should allay fears of a slide towards the …
Debt stand-off in Zambia Zambia’s first steps towards debt restructuring have not got off to a good start, reinforcing our fears that the process will be long and arduous. Last week, the Zambian government announced that it had requested a deferral of …
Geopolitical risks grow for Turkey The conflict in Nagorno-Karabakh has opened up another schism between Turkey, the EU and Russia. An escalation in tensions could trigger sharp falls in the lira and push the central bank into more aggressive monetary …
While UK-EU relations deteriorated on one front this week, with the EU sending the UK a letter to formally begin legal procedures over the UK’s plans to undermine parts of the Withdrawal Agreement, there appears to have been a more constructive mood in …
Second wave peaking in France and Spain The new wave of COVID-19 poses a big risk to the recovery and may cause GDP to contract again in Q4. The worst hit area is the Madrid region of Spain, where the number of intensive care beds occupied by coronavirus …
Brighter outlook for the NOK next year Having fallen to four-month lows against the euro in late-September, the Norwegian krone and Swedish krona bounced back this week. While the NOK is vulnerable to falling further in the near term, we think that a …
Fiscal policy to remain supportive in Indonesia Indonesia has signalled that fiscal policy will remain supportive of the economic recovery after it unveiled a budget for next year that envisages only a very small fall in the budget deficit. Earlier this …
China’s recovery boosting Australian fortunes In his note last week our chief economist Neil Shearing explained why the recovery in China has not boosted growth in many other economies. However, Australia is one of the few countries that has benefitted. …
Government dragging its heels once more We have become accustomed to central banks holding emergency meetings over recent months, but the RBI sprung a surprise this week by postponing at the last minute the meeting that was scheduled to conclude on …
Golden Week to spur consumption growth China’s “Golden Week”, a nine-day holiday that combines both National Day and the Mid-Autumn Festival, kicked off yesterday. It could provide a much-needed boost to consumption, which has lagged the recovery in …
Nationalisation over deregulation One of Prime Minister Suga’s central pledges on the campaign trail was that he would lower mobile phone tariffs. This week’s announcement by state-owned Nippon Telegraph & Telephone that it will delist its mobile phone …
Saudi budget plans suggest austerity is here to stay Saudi Arabia’s preliminary 2021 budget that was released this week reinforces our view that, with oil prices likely to stay low, policymakers are not intending to row back on recent fiscal austerity. …
1st October 2020
Lat Am currencies likely to recover The recent drop in global risk appetite, linked to fears over second waves and fading chances of additional US fiscal support, have put EM currencies in the firing line. At the time of writing, Latin American currencies …
25th September 2020
Private creditor debt relief: going separate ways This week’s moves to put very large debt burdens in Angola and Zambia on a sustainable path offer some lessons for the rest of the region, and private bondholders. In short, there are many roads to debt …
Concerns about the spread of the pandemic in Europe have continued to weigh on the stock market, but the battle over the Supreme Court could end up having a bigger bearing on the near-term outlook by further reducing the chances of a fiscal stimulus deal …
In response to a marked rise in the number of virus cases over the past few weeks, Boris Johnson announced that people should work from home if they can, that bars and restaurants would have to close at 10pm and that the reopening of other parts of the …
Amid surging cases of COVID-19, the government used its throne speech to signal a raft of policy measures to come. If implemented soon, these should help to cushion the blow from the second wave of the virus and boost the longer-term recovery. Perhaps the …
The Swiss head to the polls After a virus-imposed hiatus, the Swiss are set to resume doing what they love best this Sunday: voting. Five separate referenda will be held, covering a range of topics including whether the government should buy some new …
Currency concerns prompt interest rate hikes Central banks in Hungary and Turkey unexpectedly raised interest rates this week amid mounting concern about currency falls and inflation. While we think that this will ultimately be reversed in Hungary, …
Lacklustre fiscal support in the Philippines Inadequate fiscal support is holding back growth in the Philippines and, unless this improves, the recovery will continue to underwhelm. August data show that fiscal spending remained subdued. It grew by just …
Risk of W-shaped recovery rising This week brought evidence that the economic recovery is grinding to a halt and that activity in the services sector is falling. And with the stringency of virus containment measures only going in one direction, there is a …
Foreign demand for CGBs is growing FTSE Russell yesterday announced that it will include China in its World Government Bond Index (WGBI). This is an important milestone and means onshore Chinese Government Bonds (CGBs) are now included in all major bond …
Back to normal? The 4.1% m/m fall in private consumption in July announced by the Cabinet Office this week suggests that the second wave of coronavirus infections prompted consumers to curtail spending. But with that wave now over and mobility surging …
Better than expected in Victoria Recent data show that the draconian lockdown in Victoria that forced all non-essential business to shut at the start of August had a much smaller impact on activity than we had anticipated. We learnt last week that hours …
Labour reform could boost longer term prospects Three labour reform bills ostensibly tabled in response to the coronavirus crisis were approved in both houses of parliament this week. The highlight of these new laws is that firms now only need to obtain …
Saudi: low oil prices limit scope for policy support Saudi policymakers are apparently “assessing all the options” in a bid to boost the Kingdom’s economic recovery but, with oil prices still low, the scope to row back on fiscal austerity plans is …
24th September 2020
Drop in lira unlikely to prompt outright rate hikes The Turkish lira has come under additional pressure this week as the risk of EU sanctions has continued to rise. The central bank has tightened monetary conditions further, but an outright hike to policy …
18th September 2020
IMF increases lending to Angola The approval of Angola’s IMF programme expansion by $765mn this week will go some way towards easing balance of payments pressures, but further debt restructuring is still not out of the question. In addition to disbursing …
Argentina clamping down on dollars Argentina’s central bank has tightened capital restrictions (“ el cepo ”) to try to regain control over the peso. The strategy is just a short-term fix, though, which may come back to bite in a few years’ time. One of …
Recent calls for the government to commit to a new “fiscal anchor” means next week’s throne speech might be a bit less exciting than we first thought, but it still seems likely that the government will signal some ambitious new spending plans ahead. MPs …
Fed underwhelms with new forward guidance After seeming to take a bold new step when it recently announced it would be adopting a flexible average inflation target, the Fed risked disappointing markets this week when it failed to back that up with much …
Investment holding back the recovery It seems that consumers have largely forgotten about the pandemic already. Retail sales are now 4.0% above their pre-pandemic level (see here ) and the mini-boom in the housing market will continue to support …
“No change” three ways on the policy menu Central bankers will take centre stage next week, with the Riksbank kicking things off on Tuesday, and the SNB and the Norges Bank both set to make scheduled policy announcements within 30 minutes of each other on …
A key assumption in our forecasts has been that there will not be a repeat of the spring’s strict nationwide lockdowns that would cause the recovery in economic activity to go into reverse. That assumption is looking a bit shakier in light of headlines …
Peso to hold up in months ahead The Philippine peso has been the best performing currency in Emerging Asia so far this year (see Chart 1.) and is now at its highest level against the US dollar since late 2016. We expect the peso to strengthen further over …
First new Prime Minister since 2012 Despite its similarity to PM Abe’s cabinet – which faced mounting disapproval – public support for PM Suga’s new cabinet has surged. Suga Yoshihide became PM on Wednesday having won a landslide victory in the LDP …
China’s economy is largely back to normal It’s now a consensus view that China’s near-term economic prospects are bright, especially relative to elsewhere. But even amid upbeat expectations, the August activity and spending data published this week still …
NZ economy should rebound quickly Production GDP in New Zealand fell by 12.2% q/q in Q2 due to the strict lockdown which restricted most activity in April. That compares to the smaller 7.0% fall in GDP in Australia. That makes sense given that the initial …
Strength in car sales won’t last Data released this week show that new passenger vehicle sales jumped by 14% y/y in August, the first positive rate of growth since the nationwide lockdown and the strongest monthly number since 2018. (See Chart 1.) That …
OPEC meets as clouds gather over the oil market The OPEC ministerial meeting that takes place today is unlikely to result in any immediate policy changes, but the cartel will probably acknowledge the worsening demand outlook and may signal that it stands …
17th September 2020
A way out of Brazil’s fiscal straitjacket? Brazil’s congress will reportedly receive a plan for the Federative Pact reform next week, which could ease concerns about the public finances. The essence of the Pact is that it will shift spending …
11th September 2020
Russia’s services sector cushions the fall in Q2 GDP The production breakdown of Russian GDP for Q2 showed that the economy’s sectoral structure helped to cushion the fall in output from the pandemic. Rosstat revised its estimate for the fall in GDP from …
Following the Bank of Canada’s decision to keep interest rates unchanged at 0.25% this week, Governor Tiff Macklem’s speech on Thursday was another sign that the Bank is heading toward including some measure of inequality in its monetary policy framework. …
The July Job Opening and Labour Turnover Survey (JOLTS) released this week suggests the labour market is in much better health than the downbeat jobless claims figures imply. The JOLTS report did confirm the sharp slowdown in the pace of payroll growth in …
A 6% fall in the pound from $1.35 to $1.28, questions over the legality of the government’s actions and condemnation from the EU are all sure signs that the summer is over, a Brexit deadline is looming and the possibility of the transition period ending …
Seeing the good, the bad and the ugly in SA data Figures released this week provided little cause for optimism about South Africa’s prospects for a strong rebound in activity. The slew of terrible data might, at least, prompt policymakers to lend more …
Sweden’s virus approach may be bearing fruit Interpreting Covid data is of course part science, part art, but the fact that confirmed virus cases per capita in Sweden fell below those in its Nordic peers in early-September appears to vindicate Sweden’s …
