Dreadful economic data from the Philippines Labour market and industrial production data released today for the Philippines confirm that output collapsed in April. With the lockdown being eased only gradually, the recovery in the Philippines is lagging …
5th June 2020
Government spending was subdued at the start of the year, in large part because work on infrastructure projects was disrupted by the COVID-19 lockdown and by the subsequent labour shortages due to the slow return of migrant workers. But now that those …
Unprecedented slump in services spending We learned last week that retail sales plunged 9.6% m/m in April while Japan was in a state of emergency. Household spending on services is usually more stable than retail sending. But it has also been hammered …
SNB breathes a sigh of relief as the franc slides The positive policy moves out of Europe – including the ECB’s decision yesterday to increase the size and duration of its Pandemic Emergency Purchase Programme – have reinforced the sense that policymakers …
The economic data released this week have simply confirmed what we already knew: that April was completely catastrophic for the euro-zone economy but that there has since been a gradual resumption in activity throughout the region. Euro-zone retail sales …
Little market reaction from Moody’s downgrade Moody’s announced this week that it has cut India’s local and foreign-currency sovereign ratings from Baa2 to Baa3, leaving them just one notch above junk status. Moody’s cited the deteriorating fiscal …
Budget Update delayed to reassess JobKeeper Josh Frydenberg has confirmed that the Budget Update due in June will be delayed so that the government has time to reassess the JobKeeper scheme. For what it’s worth, our assessment of the outlook for the …
Saudi, FX reserves, PIF and Newcastle United The sharp decline in Saudi Arabia’s foreign exchange reserves in recent months is more benign than it appears. But with the sovereign wealth fund holding an increasing share of the Kingdom’s FX savings, it will …
4th June 2020
Banxico gives clues of significant easing This week Banxico released its first Quarterly Report of the year, and the minutes of its May 14 th meeting. Three points stand out from these pieces. First, Banxico’s GDP views look (plausibly) downbeat. It …
29th May 2020
Last week, CMHC CEO Evan Siddall raised a few eyebrows by saying that the crown corporation expects house prices to decline by between 9% and 18% in the next 12 months. This week, the CMHC provided further detail on that view in a new report. In its …
A month after the first states began to re-open their economies there is both good and bad news. The good news is that, up to now at least, there is no evidence that re-opening has led to a much-feared second wave of infections. The bad news is that, …
A Hamilton moment? The main event this week was the publication of the EC’s blueprint for joint borrowing, building on last week’s Franco-German proposal. (See here .) This has been hailed by some as a “Hamilton moment”, referring to the 1790 decision by …
Debt talks moving forwards The past week has brought private sector debt relief for the region a step closer. Zambia hired advisors to help its restructuring talks. This was prompted by the IMF, which has made Zambia’s request for emergency financial …
Nagy departure won’t affect MNB’s dovishness The resignation of one of the Hungarian central bank’s (MNB) key personnel may lead to a simplification of the monetary policy framework but is unlikely to alter the institution’s dovish bias. After 18 years …
Skingsley leaves the door open to a repo rate cut This morning’s upward revision to Swedish Q1 GDP, from the initial estimate of -0.3% to +0.1%, adds to the evidence that the country has enjoyed some economic benefit from its light-touch lockdown. That …
While this week’s high frequency data have confirmed that the low point for the economy is behind us, the figures have done little to alleviate our concerns that the recovery will be protracted. The good news is that after giving the green light to some …
China’s National People’s Congress (NPC) ended yesterday. The main economic news came at the opening of the event last Friday, when the government laid out plans for the largest stimulus package since 2009 . However, these plans have been overshadowed by …
Bumps in the recovery More and more countries across the region have been relaxing lockdowns over recent weeks, and a recovery in economic activity now seems to be underway. However, with restrictions being relaxed, new cases have started to flare up. …
Consumption plunging in April The slump in activity in April was worse than most had anticipated. While domestic demand will rebound now that the state of emergency has come to an end, we think it will take until 2022 for output to return to pre-virus …
Slump in revenue will widen budget shortfall The Treasury last week discovered that many of the firms applying for its JobKeeper wage subsidy had filled out the application form wrongly. As a result, the Treasury now estimates that only 3.5mn workers …
Activity edging up… PM Modi is likely to extend the lockdown when he addresses the nation on Sunday. However, restrictions are set to be eased significantly, continuing the trend since the start of May. Indeed, domestic flight and train services have been …
Easing lockdowns will lead to only slow recoveries As Eid al-Fitr celebrations across the Middle East and North Africa draw to a close, a number of countries have started to outline their paths out of stringent coronavirus lockdowns. Dubai, where some …
28th May 2020
Virus spread worsens growth outlook Brazil has hit the headlines this week amid a rapidly developing political crisis and the rampant spread of coronavirus in the country. The number of new cases per day is nearing that in the US. But Brazil is not the …
22nd May 2020
A closer look at the house price forecasts from the Canada Mortgage and Housing Corporation (CMHC) shows they are not as alarming as they first seem. The worry, however, is that the very public warning from the crown corporation becomes self-fulfilling. …
Financial support for Turkey a sticking plaster Financing provided by Qatar and Japan has reduced the immediate threat of another currency crisis in Turkey, but ongoing efforts to defend the lira will ultimately lead to a sharp adjustment. Earlier this …
Policymakers have more work to do The account of April’s ECB meeting, published today, shows that the Governing Council has left the door wide open to further monetary policy support. As a reminder, at that meeting the Council made the Targeted …
SA: Downturn starting from a point of weakness South Africa’s usual run of activity figures is behind schedule due to the lockdown. (See here .) The data for February, published this week, were of course outdated. But they showed that the economy was …
Most of the 50 states have now begun to ease their lockdown restrictions, with many states in the interior now maintaining only minor restrictions on normal activity, although states on both coasts still have major restrictions in place. Nevertheless, the …
Bank of Korea to get unconventional The Bank of Korea is likely to cut its policy rate to a record low of 0.5% and step up non-conventional support at its meeting on Thursday. At its last meeting in early April, the Bank held rates steady. (See here .) …
The goings on in the gilt market neatly summarise how it is been a negative week for the economy and financial markets. On Wednesday, the government sold 3-year gilts at a negative yield (of 0.003%) for the first time, meaning that if investors hold the …
Sweden faces some time out in the cold Norway, Denmark and Finland are reportedly considering keeping their borders with Sweden closed, even as and when they open them to others, because of the higher prevalence of Covid-19 infections there following its …
Imports proving resilient to corona calamity The strength of imports in March and April suggests that our forecast for a double-digit drop in import volumes this quarter was too pessimistic. The Bank of Japan’s data released on Thursday showed a 4% m/m …
Record slowdown in retail spending The preliminary estimate of a 17.9% m/m fall in retail spending in April marked the steepest decline on record. But that fall overstates the weakness in retail spending. Given retail sales spiked by 8.5% m/m in March, …
Resuming transport services a big risk Policymakers decided this week to further loosen containment measures by allowing some travel to resume. Restrictions on interstate passenger trains have been partially lifted, while domestic flights are due to …
Huawei dispute highlights costs of decoupling The US took further action against China during the past week, including cutting off Huawei from any semiconductor suppliers that use US technology, even if the firms aren’t American. In response, China has …
Dubai’s economic hit brings bailout on to agenda The past week has provided clear signs of the toll that the coronavirus crisis is taking on Dubai’s economy and negotiations are apparently underway for Abu Dhabi to ride to the rescue. As we’ve noted …
21st May 2020
The Bank of Canada’s Financial System Review (FSR) highlights the positive effect that its actions have played in reducing stress in the financial system, as well as the effect that the government’s actions should have in reducing debt defaults. …
15th May 2020
Real tumbles as political turmoil worsens Brazilian financial markets suffered further sharp falls this week as concerns about the political crisis mounted. We looked at justice minister Sérgio Moro’s resignation in detail a few weeks ago. (See here .) …
Nigeria’s budget saga continues The amendments to the 2020 budget approved by Nigeria’s cabinet this week suggest that the government is not yet fully facing up to the fiscal damage caused by the coronavirus. The authorities revised the budget for the …
The news this week that core consumer prices fell by 0.4% m/m in April has added to the speculation that the pandemic could tip the US into a Japan-style deflation. At 1.4% last month, the annual core CPI inflation rate is still well above the lows …
As the UK imports lessons from Asian countries about controlling pandemics, it may also be useful to take note of the fiscal situation in Japan. The UK Treasury is reportedly already thinking up ways to reduce public debt in the aftermath of the …
Turkey’s balance of payments problems Strains in Turkey’s balance of payments persist and recent developments have done little to alter our view that the risk of another currency crisis is rising. Data this week showed that the current account posted a …
Yet another iteration of the Norwegian Budget The publication of a revised 2020 budget by the Norwegian government on Tuesday raised a couple of points worth noting. First, the government’s forecast of a 4% fall in mainland GDP this year is on the …
This week’s data have brought further evidence of just how badly the euro-zone economy fared at the tail end of Q1. Industrial production , which had hardly been booming prior to the coronavirus pandemic, was unsurprisingly weak in March, while in the …
Tourism slump in Thailand The first quarter GDP figures for Thailand (due on Monday) will make for grim reading. While all economies have been hit hard by coronavirus containment measures, the global tourism industry has suffered disproportionately. …
Package will have limited impact on demand After weeks of inaction, the government has made a splash with its new support package by spreading the details across three separate announcements (and counting) this week. Table 1: Breakdown of COVID-19 Relief …
State of emergency ending in most prefectures Japan declared a state of emergency on 6 th April and extended it nationwide on 16 th April. During the state of emergency, citizens were asked to stay at home This helped reduce the number of new coronavirus …
Unemployment may not rise all that much The 4.6% m/m fall in employment in April was broadly in line with our forecast, but due to an unprecedented slump in the participation rate, the unemployment rate only rose from 5.2% to 6.2%. Over the coming months, …
Growth target and policy signals After a delay of over two months, the annual meeting of the China’s legislature, the National People’s Congress (NPC), will kick off next Friday. A schedule has yet to be made public but the key events, the annual work …
Egypt, Lebanon and the IMF Egypt and Lebanon took further steps towards securing IMF support this week, but finalising a deal will prove much harder for the latter than the former. Earlier this week, the IMF approved Egypt’s request for emergency …
14th May 2020
