The UAE banking sector’s non-performing loan ratio has hit its highest level since 2005, although banks’ high level of profitability coming into the crisis has helped to shield them so far. And strong capital buffers mean that they look well positioned …
14th April 2021
South Africa’s hard activity data for February show that the recovery resumed following a January slump on the back of a second virus wave. While the economy will probably finish Q1 on a stronger note, we think that major headwinds will weigh on activity …
Virus outbreaks have taken a sharp turn for the worse across several large EMs – including India and much of Latin America – and look likely to hold back economic recoveries in Q2. The recent experience of Chile suggests that it will be a long slog for …
The delayed start to deliveries of the J&J vaccine is yet another blow to the rollout in continental Europe and on its own could delay things by at least one month compared to a situation in which the recent pace of vaccinations is sustained. This Update …
The COVID-19 crisis has caused bad loans at South Africa’s banks to rise, but the impact so far has not been as bad as feared. That said, the hit to profitability in the banking sector, combined with an apparent reluctance among households and firms to …
Initial demand indicators support our view of further falls in Dublin office rents this year. And with construction on hold, spill overs from delayed completions could threaten the rental recovery. CBRE data for Q1 showed that weak economic activity and …
The Reserve Bank of New Zealand (RBNZ) stuck to its dovish stance when it left policy settings unchanged today, but we still expect the Bank to raise rates towards the end of next year. As expected, the Bank did not adjust its policy rate or its asset …
The Monetary Authority of Singapore (MAS) left policy on hold today as advanced Q1 GDP data showed the economy rebounded further. While GDP is set to continue recovering at a decent pace, a persistent output gap is likely to remain, keeping a lid on …
House prices look increasingly vulnerable to future rises in interest rates. While the economy coped well the last time the Bank of Canada’s rate hikes shook the housing market in 2017 and 2018, the risks are greater now because residential investment …
13th April 2021
A divergence between strong surveys and weak industrial ‘hard’ data, mainly in the euro-zone, has again raised questions about how to interpret the business surveys. There are several reasons why survey indices of output have overstated the actual …
The resilience of tax receipts and the improved outlook for oil and gas revenues should provide scope for Russia’s government to soften its grip on the public finances and ease policy over the next few years. We expect an additional 2.0% of GDP of …
China’s imports of key industrial commodities point to ongoing strength in domestic demand. But the bigger picture is that import volumes remain well below last year’s peaks, and we expect growth in China’s commodity demand to slow further this year as …
Long-term interest rates have risen sharply since the end of 2020 and may rise further, but that shouldn’t be a drag on the housing market. In fact, we think that mortgage rates will fall a little further in the medium term, helping to ensure that the …
The faster-than-expected timetable to ease virus restrictions, limited supply pipeline in central areas and confirmation that home working has not increased significantly from its pre-virus levels suggest that office vacancy in Copenhagen will peak later …
The surprising victory for conservative Guillermo Lasso in Ecuador’s presidential election increases the chances that public debt will be put onto a sustainable path, and will probably boost the country’s sovereign dollar bonds in the near term. …
12th April 2021
Mobility data have weakened in many parts of the world in recent weeks as virus numbers either remain high or continue to climb, risking restrictions staying in place for even longer. The latest data out of Israel suggest that its speedy vaccine rollout …
9th April 2021
If enacted, President Joe Biden’s corporate tax reforms could become a significant drag on US equities and hit the earnings of technology, pharmaceuticals and biotech companies particularly hard. However, political wrangling could mean the changes …
We estimate that households accumulated “excess” savings of around 4.4% of GDP last year. But they are unlikely to spend this cash any time soon, so it will probably not do much to boost the recovery. Data published today show that euro-zone households …
We expect higher government bond yields in the US than in other developed markets (DMs) to push the US dollar up, as has generally been the case since the Global Financial Crisis. Admittedly, the relationship between the government bond yield gap and the …
Few office or retail markets currently look economically viable for residential conversions. However, expected falls in values, particularly for retail, and acute housing shortages suggest that there is scope for conversions to increase in many markets. …
While Chile is currently battling with a severe wave of virus cases, we remain cautiously optimistic about the resilience of the economy in Q2, and the prospect of a vaccine-related boost to output over the second half of this year. As a result, we are …
8th April 2021
The road to recovery in South Africa’s manufacturing sector will probably be slow and bumpy. Weak domestic demand and persistent power cuts will act as key headwinds, although export-oriented sectors are likely to benefit from a continued rebound in …
While we have revised down our oil price forecast for Q2 and Q3 this year in response to the OPEC+ decision to ease production cuts, we still think a rebound in global demand will help push oil prices back above $70 per barrel. We expect weaker oil demand …
The account of March’s ECB meeting showed that the decision to increase asset purchases was agreed by all members, but that some were reluctant to do much more. In practice, purchases haven’t risen very far since then. Given that the Bank could have …
While Asian goods exports have fared better than those from the rest of the world and especially those from advanced economies over the past year, this performance gap should narrow as economies reopen. Global goods trade continued its strong recovery at …
In recent years, and particularly since the start of the pandemic, the pressure on central banks to address climate change has increased. This Update considers the potential implications for financial markets of some of the changes they have made until …
Turkey’s large external vulnerabilities mean that aggressive rate cuts by the central bank (CBRT) would run the risk of sharp and destabilising falls in the lira. A probable next step by policymakers would be a turn towards capital controls. But we doubt …
After declining in 2021, we think that favourable supply conditions and a rebound in consumer spending will support a recovery in Budapest retail rents into next year. And while the sharp increase in online shopping last year suggests a downside risk to …
The mooted $650bn allocation of IMF Special Drawing Rights (SDRs) that looks close to being signed off would provide welcome relief to some smaller frontier markets such as Ghana and Kenya that still face very high foreign borrowing costs. But it won’t …
7th April 2021
While investment in build-to-rent developments has been notably resilient over the past year, we continue to think that the growth of the sector will be slow for two reasons. First, high house prices relative to rents means that build-to-rent investors …
The recent decision by OPEC+ to increase its oil production quotas and the prospect of higher Iranian output point to a smaller global oil market deficit this year than we had previously envisaged. Nevertheless, the persistent deficit means that we still …
The MPC voted to keep the repo and reverse repo rates on hold today amid the surge in COVID-19 cases, and committed to keeping policy “accommodative to support and nurture the recovery”. Given this, we continue to think that markets are too hawkish in …
The comparative success that the Danish government has had in handling COVID has allowed it to start to re-open the economy, despite the painfully slow progress on the vaccine front. Most economies in Europe are not as well placed, however, so their …
6th April 2021
The unveiling of Vietnam’s new leadership team earlier this week contained no new surprises, and we are not expecting any significant changes in policy direction. The economy is well-placed to meet the 6.5%-7.0% growth target that was unveiled as part of …
Rapidly rising property prices have become a big political issue in Korea, but they don’t pose a significant threat to the economy. In February, property prices across Korea rose by 10% y/y – the fastest increase since 2007. Increases in Seoul, which is …
The Reserve Bank of Australia stuck to its dovish stance despite the strength in recent data so we reiterate our view that it will expand its bond purchase program by another $100bn in June. The Bank acknowledged the recent improvement in the global …
Markit’s EM manufacturing PMI dipped last month, but the survey still paints a pretty positive picture of the sector’s recovery across the emerging world – with Brazil a notable outlier. In the meantime, supply chain disruptions are causing price …
1st April 2021
The rise in March’s global manufacturing PMI suggested that world industrial production continued to recover. But the headline index masked a divergence at the country level, with sizeable gains in advanced economies offsetting small falls in major EMs. …
The broad consensus among Germany’s major parties means that September’s election will not lead to big macroeconomic policy changes. But with the Greens and/or SDP set to gain influence, fiscal policy could become marginally less conservative, and Germany …
Despite some conflicting messages from the official and unofficial PMI data out of China, both surveys continue to point to lower industrial metals prices. A pick-up in manufacturing activity and exports elsewhere in Asia should ensure that prices hold up …
Though retail warehouse rents saw their largest ever annual fall in 2020, this drop was not as deep as in other retail sub-sectors. Looking ahead, while a higher level of remote working than before the pandemic is likely to continue supporting out-of-town …
Travel restrictions will hold back cross-border capital flows until at least H2. And given that we expect extra-European capital to return particularly slowly, total investment is set to recover gradually in 2021. With travel restrictions tight for most …
The rise in new COVID-19 infections to a six-month high yesterday has predominantly been limited to one state. But there are signs that the virus is spreading rapidly to other parts of the country and, with the vaccine rollout proving slow-going, the …
Past experience suggests that, with inflation near a peak and the economy slowing (alongside pressure from President Erdogan for lower interest rates), Turkey’s central bank will push ahead and ease monetary conditions in the coming months . Last week we …
31st March 2021
The recent drop in the price of gold below $1,700/oz. has illustrated its greater sensitivity to US long- than short-dated real yields. Although the price has nudged back up above this level at the time of writing, we expect it to fall back to an even …
We suspect that President Joe Biden will struggle to garner bipartisan support for his $2trn in infrastructure spending, even if he was willing to placate centrist Senate Republicans by dropping his proposal to fully fund that investment by raising …
Inflation looks set to rise further in Germany than in most other euro-zone economies this year and we suspect that it will remain higher there after the pandemic is over. However, we doubt that this will stop the ECB from maintaining ultra-loose monetary …
The rapid re-opening of Israel’s economy since February has triggered a rebound in activity that looks stronger than had been widely anticipated. In particular, the recovery in hospitality and leisure spending has been faster than that which followed …
We’ve assumed households just go back to saving the same share of their income as they did before the crisis. That is enough to drive a rapid economic recovery. The upside risk is if households go further and spend some of their stock of savings. Indeed, …
