Our latest UK economic downgrades mean that it is now inevitable that there will be a big hit to commercial property values, which we expect to fall by around 10% this year. And while conditions are different to the GFC and the shock should be short and …
20th March 2020
With the growth outlook deteriorating rapidly, the Bank of Thailand today became the sixth central bank in the region to cut interest rates this week. The 25bp emergency rate cut takes the policy rate to a new all-time low of just 0.75%. The decision to …
Banks will be slow to pass on the latest rate cuts, as the economic turmoil in Q2 puts them on the defensive. But as conditions start to normalise, mortgage interest rates will fall further, reaching 1.5% by the end of 2020. In response to the economic …
The Republican senators’ fiscal proposals would provide an immediate stimulus worth more than 2% of GDP and help to offset some of the damage to the economy from the coronavirus outbreak. That said, with layoffs already surging and a clear risk that the …
The Russian central bank’s decision to keep the policy rate unchanged at 6.00% today made it one of the few major central banks that has yet to cut rates to support the economy in response to the coronavirus. The central bank announced a series of …
The surprising weakness of Treasuries alongside the collapse in US equity prices recently seems to have been driven by fire selling, not worries about inflation or debt. However, even if further falls in the stock market mean there are more forced sales, …
The high frequency indicators we track show that the spread of the coronavirus is already having an impact on the economy. There is no doubt these activity indicators will deteriorate further as the government’s measures to contain the virus become …
We suspect that the fiscal stimulus package that will be unveiled over the weekend will focus on limiting the damage from the coronavirus outbreak rather than on providing a large boost to demand. Measures will include wage subsidies for employers and …
Commercial banks unexpectedly did not lower the Loan Prime Rate (LPR) today. Despite this, monetary conditions are still easing as the People’s Bank (PBOC) has been using a broad set of instruments to ensure that credit keeps flowing despite disruptions …
The big package of measures announced by the Bank of England today in its second emergency meeting in just over a week is designed to ease the stress in the financial markets and to support the recovery once the full economic hit from the coronavirus has …
19th March 2020
Prime Minister Modi’s address this evening seemed intended mainly to raise awareness of the threat posed by the coronavirus in India. With case numbers still low, the government has taken few measures to contain the domestic spread. But the difficulty of …
It now seems clear that the coronavirus outbreak will cause greater economic damage than we had initially thought – both globally and within Africa. Growth will slow across the region, with South Africa and tourist-dependent economies like Mauritius …
The proliferation of measures to curb the spread of the coronavirus as well as shifts in consumer behaviour will have a severe effect on retail, accommodation, recreation and transport sectors across the emerging world. Mexico and parts of East Asia are …
The Fed’s revival of financial crisis-era programs and a huge ramp-up in the pace of its open-ended Treasury purchases in recent days could help to stem some of the bleeding in financial markets. But with broader financial conditions still tightening, …
Governments in the developed world are unveiling major fiscal and monetary policy responses to try to stave off a financial crisis, and some EMs (notably parts of Emerging Europe and Emerging Asia) have the scope to ramp up their efforts too. That said, …
Efforts to contain the coronavirus outbreak look set to hit tourism sectors across the MENA region hard. The North African economies, as well as Dubai, Lebanon and Jordan, are most vulnerable and the direct hit will knock at least 2-3% off GDP this year. …
South African policymakers appear to have decided that the current grave economic situation requires a bold response, and have moved away from their traditional hawkishness. We expect that they will follow today’s 100bp cut with another 75bp of loosening …
The immediate effects of the coronavirus on the global economy are becoming increasingly clear and point to a sharp fall in output across the world. Recession looms. The effects over the longer term are less obvious. The most likely outcome is that …
Increasingly restrictive measures on people’s movement, and an imminent surge in unemployment, means we expect total home sales will drop by around 35% in the second quarter compared to the end of 2019. But the dip should prove short-lived. Assuming a …
Bank Indonesia cut interest rates today, but the slump in the rupiah in recent days means policymakers in the country will need to act more cautiously than other central banks in the region over the coming weeks and months. Today’s 25bp rate cut takes the …
OPEC+’s decision to abandon output constraint has been a factor behind the ongoing slump in oil prices. In our view, higher OPEC+ supply will weigh heavily on US shale output, prices and the risk premium in the oil price . With the oil market’s attention …
In response to the rapidly worsening outlook for the economy, Taiwan’s central bank (CBC) today cut its key policy rate today by 25bps to 1.125% and announced other measures to support the economy. However, with growth slowing sharply, further rate cuts …
While the Swiss National Bank left its key policy rate on hold at -0.75% this morning, it made all the right noises by making its exemptions to the banking sector from negative interest rates even more generous, and pledging to provide liquidity to the …
South East Asia and China are likely to be the worst affected countries by the current crisis, with some places likely to see GDP contract by up to 5% this year. Only a few economies in the region will record positive GDP growth in 2020. The outlook for …
The Brazilian central bank’s (BCB’s) statement accompanying last night’s decision to cut the Selic rate by 50bp was surprisingly cautious and suggested that further easing isn’t on the cards. With the effects of the coronavirus on Brazil’s economy likely …
The ECB announced late yesterday evening a new €750bn programme of bond purchases which is intended to contain borrowing costs for southern economies. This gives it a lot more firepower which should help to contain financial stress in the near term, but …
The Turkish lira has held up relatively well amid the coronavirus-related sell-off in EM currencies, but the country’s large external debts leave it vulnerable if external financing conditions continue to tighten. A sharper sell-off in the currency would …
The central bank in the Philippines is likely to ease further in the months ahead after opting to cut its main policy rate by 50bps today. The BSP has not yet introduced loan programmes or targeted support for financial institutions and businesses …
The RBA today announced a comprehensive set of measures to combat the disruptions to economic activity and financial markets caused by the coronavirus outbreak. If credit markets remain impaired for longer, the Bank may eventually have to purchase private …
The combination of the government responses to the coronavirus and the slump in economic activity will cause euro-zone budget balances to deteriorate by at least 10-15% of GDP this year. While this may be manageable for most countries so long as …
18th March 2020
The coronavirus outbreak has prompted interest rate cuts and fiscal support packages in several countries across Emerging Europe and we think that more easing lies in store. That said, Turkey’s easing cycle could grind to a halt and the sharp fall in the …
Our base case points to investment activity falling by 45% this year, with Q2 and Q3 seeing particularly weak deal volumes, before a decent recovery in Q4. From a historical perspective, this would be a sharper fall than either of those caused by the 2001 …
What were downside risks to the global economy just a few days ago are fast morphing into our central scenario. We now expect global GDP to fall by about 1% this year, which would be twice the decline seen in 2009. And while the rebound will hopefully be …
The crisis package outlined today by Prime Minister Justin Trudeau and Finance Minister Bill Morneau will help to cushion the blow from the disruption caused by the coronavirus outbreak. But given the scale of the disruption, the government still needs to …
We now expect the coronavirus to severely limit housing market activity this year, with transactions and house purchase mortgage approvals falling by 40% in Q2. That said, as long as any pick-up in unemployment is reasonably short lived, a house price …
The economic slump in the euro-zone increasingly threatens to trigger a wider financial sector crisis. In order to head off the risks to the banking sector, the ECB will need to provide unequivocal support for sovereign bonds, allowing governments to …
Financial conditions have generally tightened more in Latin America (particularly Mexico) than in the rest of the emerging world in recent weeks. This presents another reason to think that activity will weaken dramatically in the coming months, alongside …
Extremely dense populations in urban areas, poor healthcare provision, and limited ability to impose quarantine measures mean that countries in South and South-East Asia, as well as Egypt and Nigeria, look highly exposed to a large-scale coronavirus …
The rapid escalation of measures to contain the coronavirus outbreak suggests that the economic damage will be even larger than we anticipated only a few days ago, and we are now pencilling in a 10% annualised decline in GDP in the second quarter. For now …
Activity data from January suggest that the economy was already contracting before the coronavirus reached South Africa. The outbreak will add to economic headwinds. Policymakers are likely to spring into action by cutting their key rate on Thursday, but …
As commodity prices continue to flash red, this Update summarises how we think things will play out from here. In the near term, we suspect that further price falls are in store, regardless of policy support. Instead, it will be signs that the virus is …
With central banks already having used up most of their ammunition, we are now reliant on governments to prevent the global recession from turning into something even worse. We are optimistic that the lesson learnt from the global financial crisis was to …
The restrictive measures implemented by the authorities across Central and Eastern Europe to stem the spread of the coronavirus, as well as the spillover effects from the downturn elsewhere, will result in a sharp fall in regional GDP in Q2, of perhaps as …
The draconian coronavirus containment measures adopted by Australia’s government mean that we now expect GDP to fall by 2% this year. The Australian government is likely to respond with a larger fiscal stimulus package than the one announced last week …
The latest data point to a 20% q/q contraction in GDP this quarter (-16% y/y), even on the official figures. Given the shock to incomes and employment, the continued concern about the threat of further infections within China, and the growing disruption …
This Update was originally sent to clients as a Rapid Response immediately after Rishi Sunak’s speech on 17th March. While the large package of measures aimed to counter the economic effects of the coronavirus unveiled by the government today probably …
17th March 2020
With the euro-zone economy set to contract by 10-15% q/q in Q2 as numerous businesses come to a standstill, governments will have no choice but to provide support to businesses and households on an unprecedented scale. However, this would be far more …
In response to the rapidly worsening outlook for the economy, Pakistan’s central bank (SBP) today slashed its key policy rate by 75bp to 12.5%. With growth likely to slow sharply this year and inflation set to fall back further, more rate cuts are likely. …
We are now assuming a huge hit to GDP for the next eight weeks or so that results in growth of -10% annualised in the second quarter. But with policymakers acting quickly and working more closely together than in most places, there is a good chance they …
