Damage to banking sector will be long lasting Banking sector concerns have come back to the fore over the past week with state-owned bank Punjab National reporting yet another case of fraud, while warnings of an impending surge in non-performing loans …
17th July 2020
Net debt to rise to 60% of GDP The government is set to release a Budget update next Thursday ahead of the regular Budget on 6 th October. That will incorporate the sharp deterioration seen in the monthly financial accounts. In May the government racked …
Policy paralysis returns to Tunisia Tunisian Prime Minister Elyes Fakhfakh resigned on Wednesday after a week of political turmoil, which will hold up efforts to secure a new IMF deal and increases the threat of a sovereign debt crisis. Mr. Fakhfakh’s …
16th July 2020
Debt restructurings may be required…again Sovereign debt restructurings in Argentina and Ecuador came into focus this week, and while there are reasons for optimism, we remain concerned about fiscal sustainability in both countries. In Argentina, …
10th July 2020
The prices of most commodities rose this week, with the exception of energy . In particular, industrial metal prices rose alongside Chinese equities. Elsewhere, the European economic recovery is starting to look remarkably V-shaped, despite localised …
In his “Fiscal and Economic Snapshot”, Finance Minister Bill Morneau announced that the government is now allocating $228bn to direct spending measures to help support the economy during the pandemic, a significant increase from the previously announced …
A growing range of indicators suggest the economic recovery stalled in late-June and early July, in part because of a resurgence in virus infections. There’s clearly a risk that the virus continues spreading unchecked over the coming weeks, pushing the …
The rebound in retail sales and industrial production across Central and Eastern Europe in May supports our view that the region will experience a relatively strong recovery in the second half of this year. Data released this week provided further …
Spend, spend, spend…and spend Not that long ago a £30bn (1.4% of 2019 GDP) package of tax cuts and extra government spending would have been lauded as fiscal largesse. But coming on top of the £160bn (7.2% of GDP) already spent since the start of the …
Nordic economies have weathered Covid well May’s 2.4% m/m rise in mainland GDP in Norway would normally be enough to make you fall of your chair, but it was actually a bit underwhelming given the rapid rebound in our Recovery Tracker since lockdown …
This week brought further evidence that the early stages of the euro-zone’s economic recovery looked remarkably V-shaped. Admittedly, industrial production data for Germany published on Monday showed a weaker-than-expected rebound in May. But industrial …
Nigerian naira: devaluation but no unified rate Nigeria appears to have devalued the official naira exchange rate this week but the move has, if anything, further dented hopes for a shift towards a market-driven and unified exchange rate regime. We say …
Renewed outbreak in Tokyo manageable for now New confirmed coronavirus cases in Tokyo hit a record high of 224 today, exceeding the peak of 206 during the state of the emergency in April. While authorities in Australia and the US are responding to renewed …
9th July 2020
The stock market is a blunt policy tool Chinese equites have surged this week, after state-media talked up the need for a stock market rally in order to offset economic headwinds. There is some logic to such thinking. The link between stock prices and …
Reasons to be cautious about Diriyah Gate Construction started on a new tourist development in Saudi Arabia in recent weeks but the plan risks repeating past mistakes with other megaprojects and diverting resources away from other key areas Diriyah Gate …
Supporting the economy through the crisis The main priority for Singapore’s ruling People’s Action Party (PAP), which is certain to win tomorrow’s general election, is ensuring a strong recovery from the crisis. There are good reasons to expect a rapid …
Cases per capita argument misses important points India this week overtook Russia to become the third-worst affected country by the COVID-19 pandemic. As of Wednesday, confirmed cases in India stood at over 750,000, behind only the US and Brazil. It has …
Melbourne back in lockdown Melbourne returned into lockdown on Wednesday night as the number of new coronavirus cases hit a record high. (See Chart 1.) Residents are only allowed to leave their house for essential shopping, work and exercise and face a …
Lockdowns battering Lat Am labour markets Data this week painted a clearer picture of the recent hit to Latin American labour markets. On a seasonally adjusted basis, unemployment rates jumped by 5-10%-pts in Colombia and Peru (data for the Lima …
3rd July 2020
South Africa’s net exports: changing of the winds Balance of payments figures released this week from South Africa may paint a misleadingly positive economic picture, but – as is often the case – the devil is in the details. In Q1, South Africa’s current …
NBU governor departure raises IMF deal fears This week’s resignation of Ukraine’s central bank (NBU) governor is, by itself, unlikely to upend the country’s IMF deal but failure to replace him with a credible candidate or backsliding on recent key pieces …
We think that GDP rose by a bit more in May than Statistics Canada indicated in its press release for the April GDP data, and a larger rise is likely in June. GDP slumped by a further 11.6% m/m in April. The sectoral performance was largely as expected, …
Thailand – tourism not the only worry Despite having successfully contained the virus, which has allowed daily life in Thailand to return to normal quicker than in many places, the country is still set to be one of the worst-hit in the region this year, …
Divisions on the MPC The evidence continued to pile up this week that the economy is rebounding more quickly than we had previously expected. Footfall on UK high streets has risen sharply. On 1st June it was 75% below pre-crisis, but by the end of the …
Nordics gathered momentum into H2 The June PMI surveys from the Nordics, released this week, add to the evidence that the region’s economies are further down the road to recovery than others in Europe. In Sweden, there was plenty to be encouraged by in …
Decoupling likely to weigh on productivity growth The passage of the Hong Kong National Security Law this week is putting further strain on China’s fraught relations with the rest of the world. China still has some friends: 53 UN members voiced support …
News that German consumers went on a spending spree in May has raised hopes that the recovery will be V-shaped after all and that things will soon be back to normal. We think that only the first part of this is true. The rebound will look like a V, at …
May activity data consistent with our views The May activity data were weaker than most had anticipated but broadly consistent with our below-consensus forecast of a 9% q/q drop in Q2 GDP. While consumption soared in the US and many European countries …
New virus outbreak in Melbourne The economy bounced back strongly after the end of the lockdown as retail sales surged nearly 17% m/m in May and sales in the majority of categories was above pre-virus levels. (See here .) Admittedly, imports of consumer …
More push back against Chinese influence Border tensions between India and China thankfully appear to have eased over the past couple of weeks but Indian authorities continue to push back against Chinese influence in the country. This week, 59 Chinese …
The renewed wave of coronavirus infections prompted the worst affected states in the South and West to re-introduce measures to restrict activity at bars and restaurants this week. But we are unlikely to see the return of the types of draconian lockdowns …
2nd July 2020
Dubai’s recovery to be sluggish Figures released this week showed that Dubai’s economy shrunk by 3.5% y/y in Q1 due to the start of the coronavirus crisis. Of course, Q1 figures are old news and only covered the first month of lockdown (in March). More …
Fiscal paths point to diverging recoveries The governments of Brazil, Colombia and Chile have recently outlined plans that shed light on the path of fiscal policy beyond this year, which is likely to result in diverging recovery prospects. At one end of …
26th June 2020
The decision by Fitch to downgrade Canada’s sovereign debt rating means little in practice, and we think the long-term public debt outlook is far less concerning than for many other economies. Sovereign downgrades always make the headlines, but unless a …
SA budget woes to become a permanent fixture The weak state of South Africa’s public finances was underscored by this week’s emergency budget . Finance Minister Tito Mboweni painted a grim picture, revising the 2020/21 budget deficit to 14.6% of GDP (from …
The latest polling and betting odds data suggest that Joe Biden is pulling ahead of Donald Trump in the race to win November’s Presidential election. (See Chart 1.) Trump’s approval ratings have taken a hit from his mishandling of the coronavirus pandemic …
Putin seeks to consolidate power with referendum Russians began voting this week on amendments to the constitution which would give President Putin the opportunity to rule unfettered until 2036. The government has sweetened the deal with fiscal …
While we were correct in forecasting a peak-to-trough fall in GDP of 25% (see here ) , recent data suggest that the rebound in economic activity began sooner and has been a bit stronger than we had previously anticipated. By May, the retail sector had …
Central government adds to the bond deluge The government and quasi-fiscal entities including LGFVs and policy banks have significantly ramped up borrowing in recent months. To the end of May, only 12% of this was by the central government. But since the …
Nordic consumers splash the ‘cash’ Retail sales data for May released this week show that consumers in the Nordics have splashed the cash since lockdowns have been eased (figuratively speaking, of course, given that cash usage is increasingly rare in …
This week kicked off with growing fears of a second wave in Germany, as the all-important R number jumped from around 1 to almost 3 last weekend. But as we argued here , the localised nature of the outbreaks and better monitoring mean that there is …
Taiwan continuing to perform well Data published over the past week provide further evidence that Taiwan’s economy is continuing to hold up extremely well. Industrial production grew 1.5% y/y in May, and while this was down from 4.2% the month before, it …
Money stuck in the admin pipeline The flagship measure of April’s supplementary budget was the plan to distribute ¥100,000 to every resident. That was deemed a faster and more effective way of lifting consumption out of its coronavirus slumber than the …
Almost all restrictions lifted in New Zealand New Zealand has almost entirely eliminated Covid-19 and has removed all domestic restrictions on activity. There have been a handful of cases among returning citizens at quarantine facilities at the border but …
Rural economy bounces back, urban areas suffer As always, we need to treat Indian labour market statistics with caution, but unemployment data from CMIE released this week were noteworthy. They show that the rural unemployment rate dropped sharply from a …
Banking sector risks rising in the UAE The UAE’s banking sector is continuing to show signs of vulnerability and reports over the past week have echoed our concerns. (See here .) Moody’s downgraded eight of the UAE’s largest banks, including Emirates NBD, …
25th June 2020
Chile’s push for QE gains momentum Chile’s central bank took a further step into unconventional territory this week, after announcing what appears to be the first QE programme in the region. (See our Update for more.) While few details were released at …
19th June 2020
We are growing more confident that the initial rebound in economic activity following the lockdown will be stronger than we first thought, but housing remains a key risk to the outlook beyond the next few months. Admittedly, the latest activity data have …
Poland’s central bank likely to consider other tools Comments from Poland’s central bank (NBP) this week highlighting the risk that a stronger zloty would hold back the economic recovery suggests that the NBP may pursue a more aggressive monetary stance. …
There was a large disconnect between the extent of the sizeable rebound in retail sales in May and the much more lacklustre recovery in manufacturing output last month. We expect the gap to close over the coming months, however, as more manufacturing …
