We estimate that the coronavirus-related sell-off in EM currencies will push up inflation over the next year by 0.6-0.7%-pts in Russia, Turkey and South Africa, reinforcing our view that easing cycles in these countries are close to an end. For most other …
25th February 2020
While we are not convinced that capacity in the construction sector will be an immediate restraint on a big public investment splurge, the inner workings of the government could lessen the amount of money spent. So although a big fiscal stimulus is still …
The slightly more hawkish tone of the Hungarian central bank’s post-meeting statement supports our view that the central bank will deliver a 10bp hike in the overnight deposit rate next month. However, the MNB is a dovish institution and, with inflation …
If the current robust trend in employment growth continues, the unemployment rate could eventually fall to its lowest level since the early 1950s. But even if it does, there are several reasons to think that would be overstating the true degree of …
Portugal’s economy has been a relative bright spot in the euro-zone in recent years and we think it will fare better than average again this year. Nonetheless, quarterly GDP growth looks set to slow from Q4’s stellar pace as investment eases and slower …
The next few months could see a modest jump in London house prices, and we have upgraded our forecast to a 4% gain for 2020. But with the house price to earnings ratio still exceptionally high, any recovery in the capital is unlikely to be sustained. Once …
We estimate that the disruptions to China’s economic activity in the wake of the coronavirus will reduce Australia’s total exports by 3% this month. The drag from fewer Chinese students and tourists arriving in the country could reduce exports by another …
So far, the knock-on effects from the downturn in China on the euro-zone economy have been negligible. However, the jump in confirmed cases in Italy this weekend adds another channel through which the virus could hurt the economy. It also makes another …
24th February 2020
Coronavirus on its own won’t suddenly precipitate a big decoupling between China and the West, but the virus adds to a list of other reasons why a process of de-globalisation lies ahead. The big threat to globalisation in the past couple of years has come …
The political turmoil that has engulfed Malaysia is likely to undermine the government’s response to the coronavirus crisis and could also set back the progress the country has made in tackling corruption. Malaysia’s politics was thrown into turmoil …
We think that the construction sector has the capacity to deliver an increase in public sector investment of around £50bn over the next five years if it is phased in gradually. Unless capacity increases significantly, the government’s manifesto plan to …
Hungary’s central bank will probably use Tuesday’s meeting to flag a shift towards tightening and we expect a small hike in the overnight deposit rate in March. But this is likely to be a symbolic gesture more than anything else. Monetary policy will stay …
The Flash PMIs for February suggest that, while Japan’s economy has taken a hit from coronavirus-related disruption, there has not yet been much impact on other advanced economies. Today’s batch of PMIs offered the first indication of the effect of the …
21st February 2020
Leading indicators could be understating the coming recovery in housing sales. While we maintain our view that the recovery in transactions and lending will be modest, this suggests that the risks to our forecasts are on the upside. The housing market …
The Central Bank of Egypt’s (CBE) decision to keep interest rates unchanged last night for a second consecutive meeting suggests that policymakers are more concerned by the recent uptick in inflation than we had originally thought. As a result, we’ve …
With the number of confirmed infections of the new coronavirus rising in Japan, cancellation or postponement of this year’s Tokyo Olympics is becoming a possibility worth considering. The key point in terms of the economic impact of such a move is that …
While the price of US natural gas (Henry Hub) has slumped on the back of coronavirus-related concerns, it has fared better than natural gas prices elsewhere. And given the low exposure of US LNG exporters to areas affected by the virus, we expect Henry …
The price of platinum has risen by nearly 5% since the start of February, buoyed by heightened uncertainty prompted by the outbreak of COVID-19. Later this year, and assuming the virus is successfully contained, we anticipate that a gradual turnaround in …
20th February 2020
While we agree with investors’ general view that monetary conditions will be accommodative in DMs this year, there’s a group of countries – including the US – where the markets look too dovish. At the same time, we think too little easing has been …
Rental growth of 3.5% to 4.5% y/y over the next five years is the key reason why we expect apartments will outperform other commercial property sectors. Stretched home valuations, tightening mortgage lending standards and a record low number of homes for …
The account of the ECB’s January meeting suggests that the ECB was becoming a little more positive on the economic outlook. But weak data and the spread of the coronavirus since then will have surely added to the downside risks. We are sticking to our …
The IMF’s (belated) announcement that Argentina’s public debt is “unsustainable” removes any doubt that private bondholders will need to stomach large haircuts in a restructuring. But investors are unlikely to accept those anytime soon, and we think that …
Due to the ongoing protests that have crippled the rail network, we are reducing our forecast for first-quarter GDP growth to 1.5% annualised, from 1.8%. But providing the blockades end soon, growth should now be stronger in the second quarter. First …
With the number of confirmed coronavirus cases in Korea jumping sharply over the past few days, the Bank of Korea is almost certain to cut interest rates at its meeting next week. The number of confirmed cases of the coronavirus in Korea doubled on …
Bank Indonesia (BI) today cut its main policy rate by 25bp to 4.75%, but we doubt this will be the start of a prolonged easing cycle given the country’s relatively limited exposure to the slowdown in China and the central bank’s concern over the rupiah. …
The Supreme Court’s ruling that Vodafone’s joint venture in India must pay up to US$7bn in retrospective levies and penalties has grabbed headlines over the past few days. In this Update , we answer three key questions about the current situation and its …
Commercial banks cut the Loan Prime Rate (LPR) today in response to moves by the People's Bank earlier in the month to lower their funding costs. While more easing is likely in the coming weeks, this alone won’t change the fortunes of the millions of …
In contrast to market expectations, we are still sceptical that the Fed will cut interest rates this year, but we agree with Treasury investors that rates are more likely to fall than rise over the next few years. Over the past six weeks, futures markets …
19th February 2020
While the euro has already fallen to its lowest level in nearly two years against the US dollar, we think that it will drop a bit further during the rest of 2020, pushed down by several factors including a weaker economic outlook and looser monetary …
The Turkish central bank (CBRT) shrugged off rising inflation and lowered interest rates by another 50bp today, but the accompanying statement was a little more cautious and we think that the easing cycle is nearing an end. With inflation set to surprise …
The proposed change to the mortgage stress tests could put even more upward pressure on house prices over the next 12 months, by increasing the amount that buyers can borrow by more than 3%. With the Bank of Canada already concerned about the impact that …
The vast majority of firms in China have enough funds to keep paying their creditors and employees for at least a couple of months amid the disruptions caused by the coronavirus outbreak. But a minority are already having to lay off workers and job losses …
Current account positions in the largest MENA economies (particularly in the Gulf, but also Egypt) have improved over the past few years. But deficits elsewhere remain large. And Algeria, Tunisia and, to a much greater extent, Lebanon face sharp currency …
Heightened global uncertainty related to the outbreak of the coronavirus will support gold and silver’s investment appeal in the near term. Later this year, however, and assuming the disease is brought under control, we anticipate that a gradual pick-up …
Our forecast for the US dollar to remain strong in 2020 suggests downward pressure on commodities prices. However, we would argue that there are instances when commodity prices can still rise - despite an appreciating US dollar - if the global …
18th February 2020
There is potential for cobalt’s end-use in electric vehicle batteries to grow rapidly. However, concerns over the concentration of cobalt supply in the DRC have held back demand so far. Several auto manufacturers are already switching to less …
Despite softer occupier activity and an increasing pipeline of supply, we think that demand will be strong enough to prop up office rental growth over the next two years. That said, given that we now expect bond yields to be higher, capital value growth …
While we suspect that the SNB has intervened to slow the rise of the franc in recent weeks, it has not prevented it from reaching a multi-year high against the euro. At the margin, an increased tolerance for a stronger currency argues against the Bank …
When faced with the choice of deciding whether to impose higher import tariffs on goods (exposing consumers to higher inflation) or lower ones (exposing firms to greater competition), the government’s latest tariff proposals suggest it has plumped for the …
After Italy’s economy shrank at the end of last year, it looks set to continue to struggle in 2020. In fact, there is a clear risk that it falls back into recession for the fourth time since 2008. The 0.3% q/q contraction in Italy’s economy in the final …
A slump in tourist arrivals has been the initial channel through which the virus outbreak in China has harmed Japan’s economy and will most likely knock around 0.4%-pts off GDP growth in Q1. As long as disruptions to supply chains and goods exports are …
With the economic cost of the coronavirus mounting, Singapore’s government opted to loosen policy significantly in its 2020 budget today. Growth is still likely to slow sharply, but the strong fiscal response means that the economy should be able to …
A slump in investment has been the key factor behind the sharp economic slowdown over the past year. A spectacular rebound is not on the cards but investment should recover gradually over the coming quarters due to a combination of fiscal and monetary …
We think that the greenback will remain strong this year, even if some of its recent strength may unwind. The dollar has started the year on the front foot : since 1 st January it has appreciated by about 3% on average against other G10 and 2% against …
17th February 2020
Disruption to China’s commodity imports, owing to the outbreak of coronavirus, has sent the Baltic Dry Index into freefall. While freight rates should recover as and when China’s industrial activity picks up, our forecast of lacklustre demand for iron ore …
While the weakening in the global economy has reignited a downside risk to the UK economy, at the moment we don’t think it will derail the recovery in domestic activity that appears to be in train. Around the turn of the year both we and the MPC took …
The recent election result in Ireland has made the prospect of reunification slightly less remote. In this Update , we answer four political questions and four economic questions about what it might mean. Although Sinn Féin won the highest share of the …
