While policymakers in the US are wrangling about how much additional stimulus is required, the debate in the UK is more about what tax rises are needed to repair the damage to the public finances caused by the pandemic. Admittedly, in next week’s Budget …
25th February 2021
The equilibrium level of real interest rates in the global economy may not remain quite as low as of late, but we expect any rise to be gradual and small. With policymakers at the same time taking a more tolerant attitude towards inflation, actual real …
24th February 2021
Much of the recent discussion on whether the proposed $1.9trn fiscal stimulus, equivalent to nearly 9% of GDP, could be too big when the output gap is closer to 3%, has glossed over the fact that the remaining shortfall in output is concentrated in the …
23rd February 2021
Europe’s natural gas pipeline network is already extensive, and we think that it is going to get bigger in the coming decades. Existing pipelines in Turkey are set to be expanded and new pipelines from Africa and the East Mediterranean Sea will probably …
22nd February 2021
Even though the unemployment rate is still as high as it was during the mining bust, job vacancies and the share of firms reporting staff shortages have surged. We suspect that this has been driven by a broad-based drop in labour mobility during the …
The pandemic hasn’t had a major disinflationary effect in Central Europe and the region is in what we think will turn out to be a prolonged period of above-target inflation. But how this affects monetary policy will differ across the region. Interest …
18th February 2021
One legacy of the pandemic is a huge expansion in central banks’ balance sheets. Fears that this will automatically boost inflation are overdone. So, too, are worries that central banks will provoke a destabilising rise in bond yields by selling their …
17th February 2021
The COVID-19 crisis has led to something of a paradox: Italy’s public debt ratio has risen, but the probability of default has fallen. That’s largely because BTP yields are likely to stay far lower than seemed plausible before the pandemic, meaning that …
11th February 2021
We suspect that President Joe Biden’s plan to more than double the minimum wage within four years would have only a minimal impact on GDP. While there would almost certainly be some job losses as a result, we expect most of the adjustment would come via …
10th February 2021
Spain’s economy had been set for a bright 2021 as the vaccine offered hope of a bumper summer tourism season. But the poor start to the rollout means that is now looking less likely. Moreover, the pandemic has exposed structural weaknesses that we think …
Our view that the recovery from the COVID-19 pandemic will be quicker and more complete than most forecasters expect suggests that the economic legacy of the crisis may not be a permanently smaller economy but instead higher inflation and bigger public …
8th February 2021
The period covered by the new Five-Year Plan offers Vietnam an opportunity to establish itself as a major export manufacturing hub. Policy priorities will be to improve the business environment so as to nurture the private sector and to attract more …
1st February 2021
We now expect the RBNZ to tighten monetary policy in the years ahead as GDP growth, the labour market and inflation will be much stronger than the Bank has anticipated. We expect asset purchases to be wound down from this year before the Bank hikes rates …
26th January 2021
The Finance Ministry faces a tough balancing act in the Union Budget for FY21/22 as it aims to stabilise the public finances while avoiding economically and politically-damaging spending cuts. The most likely outcome is that it will set ambitious revenue …
25th January 2021
We think that the Mexican central bank’s (Banxico’s) reaction function will gradually tilt towards tolerating higher inflation. As a result, we think that interest rates in Mexico will stay low for several years, perhaps until 2024, while most analysts …
14th January 2021
The relative resilience of real global merchandise trade during the pandemic has reflected several factors, most importantly robust goods spending in advanced economies. Merchandise trade flows are likely to flatten off next year as the removal of …
23rd December 2020
We estimate that the exports of goods and services that are already facing restrictions by China contribute around 1.8% to Australia’s GDP. While we still expect iron ore and liquefied natural gas exports to remain spared, that figure could rise to around …
Ten years on from the “Arab Spring” uprisings that afflicted large swathes of the Middle East and North Africa, hopes for a shift to democracy that would unleash reforms and transform the region’s economic prospects have failed to materialise. Even once …
17th December 2020
Our forecasts for GDP growth across emerging Asia in 2021 are much higher than consensus expectations across the board. Even so, in many places, output will still be below the pre-crisis level until the end of the year and it will remain well below its …
16th December 2020
The distribution of an effective COVID-19 vaccine in India will brighten the economic outlook next year, but India’s recovery will still be one of the weakest among major economies. One consequence is that government bond yields will remain exceptionally …
Due to lower spending and the generosity of government transfers, households are set to save $200bn more in 2020 than in 2019. With that rise equivalent to 14% of consumption, there are upside risks to our already above-consensus GDP growth forecasts if …
15th December 2020
President-elect Joe Biden stood for election on a far-reaching environmental plan which, although it will be harder to implement with the Republicans likely to control the Senate, still represents a dramatic U-turn from President Donald Trump’s term in …
9th December 2020
At some point, there may need to be a fiscal squeeze to pay for any lasting increase in spending caused by the COVID-19 crisis and increases in age-related spending. But the biggest danger is that fiscal policy is tightened too much too soon to fill a …
8th December 2020
We think that the spreads of “peripheral” government bonds in the euro-zone are likely to fall next year to levels not seen since before the region’s sovereign debt crisis and that they will stay low over the next decade. This reflects our view of the …
4th December 2020
This Focus sets out a framework for thinking about how the distribution of COVID-19 vaccines will affect the outlook for EMs. For much of Emerging Europe and Chile, these developments may allow economies to return to normal more quickly than we had …
30th November 2020
Despite renewed concern from policymakers in Thailand over the appreciation of the Thai baht, we find little evidence that the rising currency is having a negative effect on the economy, and we don’t think it will be a major drag on the recovery. At its …
The negative economic impacts of COVID-19 have bypassed the housing market so far due to the extraordinary support measures put in place by the government, regulators, and banks. But while policy has probably reduced and delayed the impact of COVID-19 on …
27th November 2020
Climate change will be more costly to EMs than developed countries, with parts of Africa, as well as South and South East Asia most vulnerable to rising global temperatures. That said, some EMs could benefit as investments to mitigate climate change …
19th November 2020
Virus-driven behaviour changes that support a faster online transition will boost industrial demand over the coming years. But we don’t believe the view that higher online spending will cause rents to detach permanently from the underlying strength of the …
There has been much less progress towards debt relief for African economies than many had hoped. And governments’ diverse array of creditors means that the “Common Framework” recently unveiled by the G20 to help debt distressed EMs will struggle to gain …
16th November 2020
The pandemic has increased the odds that the US will eventually experience a period of high inflation, principally because we expect the Fed to be less committed to ensuring price stability in the future. The higher public debt burden, slower global …
We think that inflation in Japan will remain subdued while the pandemic will result in a rise in US inflation to above the pre-virus pace. With both the Bank of Japan and Fed likely to remain inactive for some time, the resulting real interest rate …
13th November 2020
Financial repression – defined in the current context as measures that artificially lower the cost of government borrowing – will become an increasingly used tool to cope with higher public sector debt burdens post COVID-19. After all, it is more …
10th November 2020
A victory for the Democratic party in November’s presidential election has several potential implications for commodity markets . Very broadly, Joe Biden’s pledge to actively promote decarbonisation of the economy should accelerate the move away from …
30th October 2020
As the election campaign draws to a close, this Focus looks at how it has affected equity, bond, and currency markets so far and assesses how different outcomes could shift them after Election Day. This election campaign has already had greater impact on …
29th October 2020
We forecast that the returns from equities will beat those from government bonds in the world after COVID-19. However, we expect the outperformance of large-cap equities in the US to end. We have written extensively on our macroeconomic services about the …
20th October 2020
The state has taken on a much greater role in G7 countries during the pandemic and there is no guarantee that it will relinquish all its new powers when the coronavirus threat fades. The pandemic could accelerate the backlash against capitalism that had …
13th October 2020
Large output gaps look set to keep inflation low in most emerging markets over the next few years. But further out, we think that worrying public debt trajectories in some places (Brazil and South Africa), and greater emphasis on growth over inflation by …
Retail has been hit hard by the COVID-19 crisis and lasting changes to online spending will bring further pain. While our estimates suggest that the impact is likely to be less severe than structural change in offices, the rental outlook is expected to …
8th October 2020
In this Focus , we argue that the medium-term impact of the COVID-19 pandemic on both global economic growth and consumer behaviour has brought forward “peak oil demand” to around 2030 . As a result, we expect that real oil prices will be falling for much …
Pressure for loose fiscal policy in Brazil is likely to persist and we think that the spending cap will be cast aside in the coming years. The government is already testing the water with creative accounting to get around spending limits and this is …
6th October 2020
