The Turkish authorities have kept a tight grip on the lira in recent weeks but we don’t think that this can continue for much longer and expect the currency to fall by 20% against the dollar by end-2020. The longer that policymakers intervene to prop up …
10th February 2020
Ireland’s general election result does not change our view on the near-term outlook for the economy, which should maintain a decent pace this year and next. But it does raise questions about the longer-term risks to public finances, particularly if Irish …
The RBA may yet cut rates to 0.25% in response to the drag on economic activity from the bushfires and the coronavirus. But with domestic demand rebounding as the housing slump has turned to boom, the urgency to support the economy has diminished. The RBA …
For now, our best guess is that the economic disruption related to the coronavirus will cost the world economy over $280bn in the first quarter of this year. If we’re right, then this will mean that global GDP will not grow in q/q terms for the first time …
7th February 2020
The Russian central bank governor’s post-meeting press conference reinforced the message that, following today’s 25bp interest rate cut to 6.00%, further easing lies in store. We maintain our view that there will be another 50bp of rate cuts in the …
Bernie Sanders is still a long way from the White House, but several of his policies look very negative for US equities. If his support continues to climb that could start to weigh on the US stock market. It remains up for debate whether Bernie Sanders or …
After a severe drought in 2019, Kenya is now facing the worst desert locust outbreak in 70 years. The impact on livelihoods could be devastating, but the economy-wide cost is likely to be limited. Locust outbreaks can inflict significant economic damage …
Headline consumer price inflation is likely to have edged up in January, in large part due to a continued increase in food inflation. Further ahead, food inflation is likely to ease, but we expect core inflation to rise over the coming quarters as the …
Provided that the coronavirus is brought under control reasonably soon, the consequences for the euro-zone economy should be quite small. Nonetheless, with growth likely to be very sluggish in any case, it could be enough to cause the euro-zone economy to …
6th February 2020
The Brazilian government’s plans to enshrine full central bank independence in law would help to both keep longer-term inflation expectations low and bring down real interest rates. This adds to the reasons to think that local currency bond yields will …
We wouldn’t be surprised if the recent recovery of EM equities continued over the coming weeks, with the stock markets of those countries that fell furthest following the outbreak of the coronavirus making up lost ground. Nonetheless, we wouldn’t expect …
The statement and press conference following today’s Czech MPC meeting confirmed that the surprise decision to hike interest rates by 25bp, to 2.25%, will be a one-off. Policymakers will probably maintain a hawkish tone over the next few months but, as …
Over the next two years we expect US property to produce total returns of over 7.5% p.a. This would be stronger than any of the last three years and, more importantly, would be a better outturn than we expect for US equities and far stronger than the …
While several central banks are undertaking reviews of their monetary policy frameworks this year, the result is likely to be only small tweaks to the existing inflation-targeting frameworks. But this doesn’t rule out a potential widening of central …
With flights to and from China halted and the handful of domestic cases isolated, the risk of a coronavirus epidemic developing in the US – and the potentially devastating economic disruption that would entail – is seemingly low. However, reduced tourism, …
The ultimate impact of the coronavirus outbreak in China on the Australian economy will depend on how quickly the virus is brought under control. But given the disruption that has already happened to tourism and to Chinese demand for Australian goods …
The latest data revealed that commercial property investment in the euro-zone held steady at a record high level. And with favourable relative pricing and capital readily available, we think that investment will reach a similar level this year. Following …
The Philippines (BSP) cut its main policy rate by 25bp to 3.75% today and with growth likely to disappoint and inflation set to remain well within the BSP’s target, we expect more easing later this year. Today’s decision to cut was correctly predicted by …
The statement accompanying the Brazilian central bank’s meeting last night gave a clear steer that the easing cycle is now over. With growth likely to stay weak and inflation low, we expect that the Selic rate will be left unchanged for much longer than …
The step-up in interventions by Denmark’s Nationalbank (DNB) to strengthen the krone in January puts to bed the idea that the Bank is comfortable with allowing the krone to trade in a more symmetric band. But while the chances of a unilateral rate hike by …
While keeping rates on hold today, the RBI has kept the door open for further policy loosening over the coming months. But we doubt this will materialise, and expect the central bank to shift to tightening mode before the end of the year . All six member …
Policymakers have loosened both monetary and fiscal policy in an effort to soften the economic blow from the coronavirus. Further easing is likely in the coming weeks. But if the virus peaks soon then activity may rebound quickly, with stimulus now coming …
Emerging Asia is most vulnerable to the coronavirus-related disturbance to manufacturing supply chains. Industry-level data suggest that temporary disruption should have little macroeconomic impact in DMs. But the effects are highly uncertain, and at very …
5th February 2020
The Great Moderation in the volatility of GDP growth and price inflation, which began in the 1980s, came to an abrupt end with the onset of the financial crisis in 2008 but, a decade later, what stands out again is just how stable economic growth and …
The surge in Bernie Sanders’ perceived chances of the winning the Democratic nomination could yet weigh on the stock market if he continues to build momentum in upcoming primaries. Even so, our initial sense is that a Sanders presidency wouldn’t be as big …
The government’s hopes of hitting the record asset sales target in the budget for FY20/21 hinge on the smooth sale of large stakes in one of India’s worst-performing banks and a politically-important insurer. Neither is likely. The government may choose …
It’s possible that consumer spending stagnated or even fell outright in Q4. But this is not too worrying as stronger growth in incomes, a fall in uncertainty and a rise in confidence should lead to a rebound in consumer spending this year. Consumer …
This morning’s decision by the Central Bank of Iceland (CBI) to resume its easing cycle came as no surprise to us following the recent fall in inflation. Given the potential for the coronavirus to exacerbate the deep downturn in the tourism sector, the …
Morocco’s economy has slowed over the past few years, but we think that a recovery will take hold in 2020. Further out, we expect that the country will record growth in excess of 5% a year by 2030. After peaking at 4.0% in 2017, GDP growth in Morocco has …
The Bank of Thailand (BoT) cut interest rates today, and with the economy being hit hard by a slump in tourist arrivals as well as disruption to its industrial sector as the coronavirus continues to spread, we think more easing is likely. We have …
The investment booms that provided a key support to Central and Eastern Europe probably peaked last year. This is one reason why we think that regional GDP growth will slow in 2020-21. Investment booms tend to follow similar cycles across Central and …
Indonesia’s direct ties to China are relatively small, which makes the economy less vulnerable to the spread of the coronavirus than other countries in Emerging Asia. The main channel through which Indonesia will be affected is falling commodity prices …
A reduction in Chinese tourism as a result of the coronavirus will lead to lower spending on prime high streets, particularly in Rome, Paris and London. If tourism reduces on a global scale, the impact on spending would be greater. But so long as the …
4th February 2020
The coronavirus outbreak will result in much weaker growth in China in Q1 and has hit tourism sectors elsewhere. If factory closures in China are prolonged, the epidemic could start to cause more severe economic damage to the rest of the emerging world, …
A rise in the number of vacant homes being repaired is an indication that some owners of empty properties are planning to put them up for sale. That may provide some relief to a tight housing market, but the impact is unlikely to be large. From close to a …
If the coronavirus is eventually brought under control, we think that 2020 will mark a turnaround for gold demand. ETF inflows are likely to shrink as a more benign macroeconomic backdrop stunts safe-haven demand. Meanwhile, high local-currency prices in …
The Bank of Canada has implied that it would be willing to accept below-target inflation during periods when financial vulnerabilities are elevated. Accelerating house price inflation means financial risks are, if anything, increasing. So the bar to an …
Data due in the next week or so should give a better sense of how badly economic activity has been hit by the outbreak. And given the incubation period of the virus, the effectiveness of the containment efforts will also start to become clearer, providing …
The Reserve Bank of Australia (RBA) sounded cautious when it left rates on hold today and we think persistent weakness in the underlying economy will force the Bank to cut interest rates to 0.5% in April. The decision to leave rates on hold at 0.75% was …
The January batch of EM manufacturing PMIs generally held up well, but the surveys are yet to capture the economic damage from the coronavirus outbreak. Extended factory closures in China are likely to disrupt EM industry this quarter, particularly in …
3rd February 2020
Final manufacturing PMIs for January add to evidence that the sector’s fortunes have turned a corner in recent months. However, due to the coronavirus-related disruption, this general trend of improvement in the surveys should come to an abrupt halt in …
Much depends on if and when the outbreak of coronavirus in China is brought under control. But as it stands at present, the effects on the UK economy have probably been negligible. Our China Economics service is the place to look for analysis of the …
Having softened in each of the last four years, we expect US commercial property total returns to strengthen again in 2020, reaching close to 7%. Those returns will reflect a roughly 3% uplift in capital values, despite a slowdown in rental growth this …
China’s PMIs dipped in January, but they offered little indication of the state of the economy in the wake of the coronavirus outbreak. Though a slump in Chinese activity in Q1 now seems almost certain, the evolution of the epidemic over the coming weeks …
The province of Buenos Aires could feasibly default on a $250mn payment on Wednesday. In this Update , we answer three key questions about the current situation, the possible outcomes for Argentina’s largest province, and the implications for the …
We think that the returns from US corporate bonds and equities will be nowhere near as good in 2020 as they were in 2019, given the outlook for Treasury yields, credit spreads, and corporate earnings. US investment-grade corporate bonds put in their …
Although there remains significant political uncertainty in many euro-zone countries, we doubt that this will prevent most government bond yields from falling a bit further this year. Expectations for monetary policy often have the biggest influence on …
A period of prolonged factory closures in China as the authorities struggle to contain the coronavirus would cause significant disruption to the rest of the region and is another reason why growth in Emerging Asia looks set to slow sharply this quarter. A …
A decade after the start of its first bailout programme, the Greek government has still not reined in the cost of its pension system. And the government’s recent decision to raise pensions suggests that pension costs will increase, rather than fall, in …
