Normally it takes months before economists are sure that the economy has fallen into a recession, but the scale of the declines in the range of daily indicators we’re tracking (available on our website here ) mean it’s all but certain the economy is now …
20th March 2020
Outlook goes from bad to worse The downside risks to the global economy have now become reality and the effects of the coronavirus will cause output to fall sharply in Q2 and GDP across the region will contract this year. The number of coronavirus cases …
Finance Minister Bill Morneau this week unveiled a fiscal package equivalent to 3.6% of GDP to help offset the disruption caused the coronavirus outbreak. The bulk of that package, equivalent to 2.5% of GDP, represents tax deferrals. Firms and households …
Norges Bank opens door to further rate cuts Harold Wilson famously said that a week is a long time in politics, and this week demonstrated that the same can be true for central banks. While policymakers everywhere have not exactly been sitting on their …
Should we be worried about currency falls? Asian currencies have dropped back sharply in recent days, and with no end in sight to the crisis, further sharp falls are likely. The Indonesian rupiah has been the worst performer and is now down over 12% since …
Coronavirus: African outbreak spreading Figures released this week suggest that the coronavirus outbreak in Sub-Saharan Africa spread rapidly this week. Officially confirmed cases more than tripled. While South Africa has the largest number of confirmed …
It’s been a long week. Rather than recount every twist and turn, we will highlight a few points that seem particularly worth making. First, the decline in GDP looks set to be even bigger than we had assumed. We now think that economy will shrink by about …
GDP target unachievable, more stimulus needed Officials in China are in the midst of reviewing the 2020 targets that were set (but not made public) during the Central Economic Work Conference in December. The new targets will be announced at the National …
PM Modi, Governor Das take measured steps Both Prime Minister Modi and RBI Governor Das took cautious steps in their responses to the coronavirus outbreak this week. In his address to the nation last night, PM Modi announced a 14-hour self-curfew to take …
Economic outlook grim As measures in place to contain the virus have grown more severe, the economic outlook in Australia has naturally become even bleaker. This week Scott Morrison announced that Australia’s borders are shut to all non-Australians. In …
Loose lockdown relaxed as Europe and US tighten Japan’s coronavirus infections have been relatively stable in recent weeks even as those in Europe and the US have soared. (See Chart 1.) Some thought that Japan’s low infection numbers might just reflect a …
Saudi Arabia doubling down on oil policy, for now Oil prices have continued to plunge this week and strains on the Gulf economies are mounting. Saudi Arabia’s decision to deepen fiscal austerity is a sign that policymakers have no imminent plans to shift …
19th March 2020
Commodity prices tumbled this week, echoing moves in other financial markets . Oil was among the worst performers as Saudi Arabia and Russia announced that they will ramp up output from April, after OPEC+ abandoned its efforts to balance the oil market …
13th March 2020
We now forecast a recession in 2020, with GDP growth of -4.0% annualised in the second quarter and -0.5% in the third. Oil plummets The 31% slump in the oil price in the past week has already caused firms to slash their investment plans. If the …
Revising down our growth forecasts Latin American countries have, so far, suffered relatively few confirmed cases of the coronavirus. At the time of writing, containment measures have generally been limited to quarantines for travellers from afflicted …
Norges Bank and Riksbank are ruling nothing out After a bruising week for equities and the Norwegian krone, it is half-encouraging that the Nordic authorities are all singing off the same hymn sheet. Nonetheless, policymakers will not be able to prevent …
Good news… Despite the turmoil in regional financial markets over the past week, there has been some good news to report from Asia. New cases of the coronavirus in China have continued to fall sharply, with the country reporting just eight new cases …
The situation in euro-zone financial markets went from awful to absolutely disastrous this week as the coronavirus spread across the region. Monday’s rout was followed by a collapse in global equity prices on Thursday. European stocks had their worst …
The shift to more aggressive containment measures this week has prompted us to lower our forecast for GDP growth this year to just 0.6%. In response, we expect at least a 50bp rate cut by the Fed next week and possibly a resumption of large-scale QE too. …
Africa: Coronavirus cases contained, for now The number of confirmed coronavirus cases in Sub-Saharan Africa more than doubled this week, but there are still fewer confirmed cases in the billion-person region than in the US state of Massachusetts. …
This week’s shift in the UK government’s coronavirus strategy from the “contain” stage to the “delay” stage has not yet led to the stringent measures deployed in Europe, such as school closures and bans on mass gatherings, which would put a large dent in …
Russia: oil collapse a headwind, but not disaster The outlook for Emerging Europe has taken a considerable turn for the worse over the past week. On the face of it at least, developments seem most adverse for Russia. The shift in oil policy in Saudi …
Activity indicators plunging amid virus There was a 16% y/y jump in grocery sales in the week beginning 24 th February and the Economy Watchers Survey (EWS) conducted at the same time similarly showed that supermarkets reported stronger activity. But this …
Travel ban only the start of tougher measures The government’s announcement this week that it will suspend virtually all foreign visas for at least 30 days in a bid to contain the spread of the coronavirus won’t in itself have a major bearing on the …
Consumption will be weak despite oil price drop The price of Brent crude oil fell sharply from $45 per barrel at the end of last week to US$32 now. We expect prices to gradually recover to around US$48 per barrel by the end of the year. But the key point …
PBOC may revive old policy tool Policymakers have signalled that further monetary loosening is imminent. The State Council is calling for cuts to banks’ required reserve ratio (RRR) and PBOC officials are dropping hints about a possible cut to benchmark …
The aftermath of the oil price collapse The region has been thrown into turmoil over the past week amid the collapse in oil prices and the rising fears of the economic hit from coronavirus. The announcement by Saudi Arabia last weekend that it would …
12th March 2020
Oil prices closed below $50 per barrel this week for the first time in two years as Russia refused to rollover or deepen OPEC+ output cuts at the latest meeting with OPEC in Vienna. As a result, we will be revising our supply and price forecasts in a …
6th March 2020
The G7 communique and emergency Federal Reserve interest rate cut at the start of the week made it painfully obvious that we were wrong to think the Bank of Canada would wait longer to see how the effects of COVID-19 would play out. Given the rapidly …
Brazil: disappointment in 2019 The Brazilian Q4 GDP data released this week confirmed that 2019 was another year in which the economy fell short of expectations. (See here .) Output rose by 1.1% in 2019; expectations had started the year at more than 2%. …
The Fed’s emergency rate cut this week made it clear that officials are taking the economic risks posed by the coronavirus outbreak seriously. But with the number of new cases rising sharply, we don’t think lower interest rates will prevent activity …
Policy support to be stepped up as virus spreads The coronavirus outbreak has prompted a policy response across much of the world, but policymakers in Emerging Europe have only gone as far as acknowledging the risks. We suspect that support will be …
Activity continues slow march back to normality Disruption from efforts to contain the coronavirus outbreak has continued to ease during the past week, with most of the daily indicators that we track on our coronavirus webpage pointing towards recovery. …
Sell-off concentrating minds The market slump is galvanising policymakers into action. At the time of writing, the Euro Stoxx 50 was 15% below its mid-February peak and the ten-year Bund yield close to its all-time low. (See Chart 1.) This, of course, …
Pressure building on the SNB to cut rates While the 0.2% increase in Swiss GDP in Q4 2019 was in line with our forecast, attention has understandably moved on to the economic impact of the coronavirus and the coming policy response. There is little in the …
With the number of coronavirus cases in the UK having reached 116 and rising, we now think that a change in consumer behaviour and working practices will weigh on economic activity this year. Consumer spending is particularly important in the UK, …
Bank of Korea complacent in face of virus threat There has been some better news from Korea over the last few days, with the country reporting a drop in the number of new infections. (See Chart 1.) The government has enacted a rapid ramp-up in screening, …
Coronavirus: Counting the costs in Africa The accelerating spread of the coronavirus has prompted us to update our African economic forecasts. We’ll publish final numbers after today’s OPEC+ meeting gives us a clearer sense of global oil prices, but we …
Economic outlook grim GDP growth slowed a touch to 0.5% q/q in Q4. And with data from January showing signs of weakness even before the impact of the coronavirus, our forecast that GDP contracted by 0.1% in Q1 is now looking optimistic. The trade surplus …
Downside risks to our already bearish forecasts It’s now looking likely that Japan’s economy will contract again this quarter, which would mean the economy is in recession for the first time since 2012. The biggest drag in Q1 is likely to have come from …
Concerns over coronavirus are growing The rapid spread of the coronavirus looks increasingly likely to hamper domestic demand. Admittedly, at the time of writing the number of confirmed cases in India stands at 30, which is low in such a large population. …
Governments up policy support as virus spreads The coronavirus outbreak in the region has intensified and governments are stepping up policy support in order to deal with the economic fallout, particularly in the UAE. And OPEC+ looks set to deepen oil …
5th March 2020
Overnight index swaps now imply a 65% chance that the Bank of Canada will respond to fears about the spread of the coronavirus by cutting interest rates next week. But cases of the virus in Canada are still limited to just 14, and the Bank is concerned …
28th February 2020
The threat of a coronavirus outbreak in the US is a significant downside risk to the economic outlook. The Fed can do nothing to halt the spread of the virus, but a further tightening of financial conditions or a slump in business and consumer confidence …
Bolsonaro-Congress tensions rising Mounting global coronavirus fears this week, including the first reported case in Brazil, has put the real and Bovespa under pressure. But this is only part of the story. The real in particular was underperforming its EM …
South Africa’s budget: an uphill fight Finance Minister Tito Mboweni’s budget speech this week acknowledged the scale of the economic challenges facing South Africa, but we think that the minister’s outlook is still too rosy . The government’s increased …
Syria tensions hit Russian & Turkish markets Concerns about the coronavirus outbreak have hit global financial markets, but assets in Turkey and Russia have taken a further leg down due to tensions between the two arising from the conflict in Syria. An …
Spread of virus a potential game-changer The ten-fold increase in the number of confirmed coronavirus cases in Europe over the past week has increased the risk of a recession. So long as the virus was confined to China, the main threat to Europe was from …
Covid-19 dominates proceedings in Switzerland The geographic proximity of Switzerland to Italy has understandably raised fears about the potential spread of the coronavirus. With the number of confirmed cases in Switzerland up to 15 at the time of …
The 11% fall in UK equity prices this week shows that the situation is changing rapidly and that the financial markets appear to be pricing in the coronavirus triggering a marked weakening in the global and UK economies. At the same time, the markets have …
