STORY – Growing restrictions and re-controls threaten to push Europe back into recession and delay recovery.
These are all clues that accumulate, heralding a relapse. Economists have their eyes on a whole host of real-time indicators of the pulse of activity. Google’s mobility index, reservations for restaurants, hotels or flights on the Internet, payments by bank cards, real estate or financial transactions, etc. Anticipating major aggregates such as industrial production or services, these signals have been ringing for a few weeks. warning of a new shock for the economy.
At the beginning of October, the “Eurozone recovery tracker“, The index of recovery developed by the Oxford Economics Institute, recorded its second consecutive week of decline. The competing barometer of the Boston Consulting Group (BCG) also began to trend downward in September, predicting “Difficult months ahead”. “All European countries are starting to slow down, with Spain and France clearly losing ground”, points out Sylvain Duranton, director of BCG
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The International Monetary Fund (IMF) has even improved its forecasts for the world economy this year, but the estimates released this week by the entity led by Kristalina Georgieva show a recession that remains profound (and unprecedented) due to the impact of the covert pandemic. 19.
In the Autumn Bulletin released on Tuesday, the IMF forecasts a 4.4% drop in the world economy in 2020, an improvement of forecasts known in June, which pointed to a 4.9% fall. Still, they are far more serious than the IMF predicted in April, when the world was experiencing “great confinement” and that pointed to a worldwide recession of 3%.
If the forecasts for the global economy as a whole are now better, the same cannot be said for Portugal. The IMF points to a 10% drop in GDP in Portugal this year, when in June it estimated a less severe 8% recession.
A collection of Business from the IMF estimates for the dozens of countries (or States) it shows shows that Portugal is in the restricted batch of 13 nations with which this year’s drop in GDP is written in double digits.
Macau will have the worst performance (-52.3%), and other countries with a strong dependence on tourism (such as Portugal) also appear in this negative list. On the map above (where only the largest economies are listed) Portugal appears on the same scale as Italy, Spain, Argentina and India.
The Portuguese economy, taking into account IMF forecasts, will have the third worst performance of the European Union in 2020, with France and Greece appearing very close.
On the map above you can see the IMF forecasts for all countries in the European Union and the main world economies in 2020 and 2021. You can also compare with the estimates produced in April.
Jimmy Dimon, chief executive of JPMorgan Chase, has warned of confidence in America’s ability to pass next month’s elections, as he urged the federal government to do more to prevent a double-dip recession.
He said in a conference call regarding doubts about the election results, that he has “great confidence in this country and I am sure that we will hold appropriate elections.”
He indicated that if the United States were to suffer a double recession, there would be great suffering and pain.
President Donald Trump announced his intention to launch a new stimulus package to help US airlines that have been severely affected by the Corona pandemic, raising hope that the new stimulus package could be passed by lawmakers. Trump urged Congress to approve support for airline payrolls, saying funds and aid could be paid to small businesses with unused money from the previous stimulus.
CNN quoted informed sources as saying that Trump signed a $ 1.8 trillion stimulus package to be presented to the House of Representatives, and the value of that package is greater than the $ 1.6 trillion proposed package two weeks ago.
He expected the number of employees in New York to decrease over time, but said, “We are still building our headquarters.” He continued, “We have been building our headquarters (to work in it) for 50 years. It is not a short-term decision.”
But Damon expects real estate in New York to face some difficult times, because companies will allow employees to work from home permanently or partially, reducing the required office space.
Dhe economic consequences of the Corona restrictions are devastating everywhere, but on no continent do economic researchers rate them as negatively for their respective home countries as in Europe. With regard to the recovery, too, optimism is noticeably greater in Asia, America and Africa.
This is the result of a survey that the Munich-based Ifo Institute carried out in August among 950 economists from all over the world and has now presented. For the 27 countries in the EU, economists are therefore expecting in the most likely case a decline in gross domestic product (GDP) of 8.4 percent this year. Their assessment is particularly gloomy for France (minus 8.7 percent), Italy (minus 10.5 percent) and Spain (minus 13.6 percent). Great Britain also ranks way down on the scale with 10.0 percent.
The United States, on the other hand, even outperformed Germany, which is in a relatively good position with minus 6.5 percent (minus 7.1 percent). In the rest of North and South America, as well as in Africa, Asia and Russia, the experts are expecting severe losses in prosperity. But only South Africa, according to the survey, with minus 9.3 percent, does even worse than the EU average. According to the experts, China’s economy should grow by 2.3 percent this year.
The greatest pessismism is in Italy
The study authors put the average GDP minus of all countries at 4.4 percent. With a view to the previous survey from April of this year, this shows how much hope for a mild outcome to the Corona crisis has evaporated. At that time, the average GDP minus was 1.9 percent.
The recovery from the corona shock that began in early summer is only partially reflected in the economist survey. Only a small minority of 6 percent of the respondents believe in a V-shaped recession for their respective country, that GDP will quickly return to the pre-crisis level after the sharp slump in spring – despite the improved economic climate, despite the recently improved prospects, for example from the World Trade Organization WTO.
With 21 percent, a W curve with a double recession and with 31 percent an economic development in the form of the tick-shaped Nike logo are considered more likely. A relative majority of 42 percent of those questioned expect a U-shaped recession with a sustained decline in GDP. After returning to the corona-adjusted growthpathwhich is likely to take much longer than the return to the pre-crisislevelwas not asked.
In contrast to the April survey, only a small minority expects to have made up for what has been lost compared to the pre-crisis level in the first half of 2021; in the EU, at 4.3 percent, there are fewer than anywhere else. There is also no majority for the second half of 2021. The tendency in all countries is more towards 2022. The greatest pessismism in this regard is in Italy: 31 percent of economic researchers expect a full recovery in 2023 and 35 percent even later, report the study authors Dorine Boumans, Pauliina Sandqvist and Stefan Sauer.
Noticeable differences from country to country
Particularly worrying for Germany, too: Two thirds of those surveyed in Germany expect sustained damage to production potential, i.e. added value when the production factors are fully utilized. One of the reasons for this is bankruptcies, which result in the loss of capital and employment. In countries such as Austria, the Netherlands, but also Great Britain, Brazil and the United States, a majority of economists consider negative effects on production potential to be likely.
There are noticeable differences from country to country in the assessment of the sometimes massive government economic support. In America, for example, more than half of respondents believe there is still much to be done, despite $ 2.3 trillion in emergency aid from Congress. In contrast, the majority of German economists are of the opinion that the political measures taken are sufficient. Liquidity support for small and medium-sized enterprises enjoy the greatest support, including in the other developed economies.
Only some experts think as much of short-time working as their German colleagues – in America, for example, in addition to monetary policy measures such as the purchase of securities or interest rate cuts, even the expansion of childcare offers greater economic support. For economists in the developing and emerging countries of Asia, Latin America and Africa, on the other hand, improving the health system is the top priority.
This is the largest quarterly contraction in the British economy since quarterly records began in 1955, and marks the second consecutive quarterly decline, according to the Office for National Statistics (ONS).
Compared to the same quarter of the previous year, the UK economy fell by 21.5%.
“It is clear that the UK is in the biggest recession on record. Latest estimates show that the UK economy is now 21.8% smaller than it was at the end of 2019, highlighting the unprecedented size of this contraction “said a spokesman for the agency.
According to the ONS, there were record quarterly declines in services, production and construction in the second quarter of 2020, which have been particularly frequent in those industries that have been most exposed to government restrictions.
In general, the production of services fell by 21.3% accumulated in the first six months of this year.
The quarterly decline in the second quarter of 2020 reflected declines in the vast majority of industries, in particular accommodation and food services, wholesale and retail trade and repair of motor vehicles, health and social work expenses and administrative services activities. These industries accounted for almost half of the total contraction in service production in the second quarter.
On the other hand, the agency reported that household spending registered a record drop of 23.6% between April and June, because consumers were forced to stay at home because of the quarantine, so the British increased their savings instead of spending.
This caused the household savings rate to skyrocket to an all-time high of 29.1% in the second quarter, against 9.6% in the first three months of the year.
Due to the impact of the pandemic, the labor market worsened in July, even with the gradual reopening of the economy, bringing the total job loss to nearly 700,000.
To mitigate the massive layoffs, the British Government last week presented in Parliament a new employment support plan to replace the current subsidy scheme, whereby both private and state employees received a payment of 80 from the state % of your salary up to an amount of 2,500 pounds.
Under the new scheme, which will begin to be applied from November, companies will be able to incorporate greater flexibility in their employees’ hours.
The Government will assume up to 22% of the total salary, provided that the workers fulfill at least one third of what was their usual working day, while the employer will assume the payment of the hours worked and a third of those not worked. Ultimately, the employee could end up receiving 77% of his full salary.
It’s five to twelve: Employment Agency in Hamburg Image: dpa
Much more people than the official quota shows have nothing to do at the moment. This also applies to Germany, where many people had to go on short-time work.
Kcan that really be? The economy is plunging into the deepest recession in a long time because of Corona – but the officially recorded unemployment is rising only a little, almost at a snail’s pace? According to the Eurostat statistics office, the unemployment rate in the euro zone was 7.2 percent in March, but the latest figures for July mean that it has increased to 7.9 percent. According to these statistics, only around one million more people have been on the streets since March, a total of 12.8 million. But these numbers only show part of the truth. At the same time, millions of people have been forced to reduce their jobs to short-time work; others have lost their jobs but do not appear in the official statistics as unemployed.
Economists at the major Swiss bank UBS have therefore carried out a calculation of “shadow unemployment”. Their result: In the spring quarter, actual unemployment in the euro zone was 20 percent and now, in the third quarter, it is probably 15 percent. That is twice as much as in the Eurostat figures. In Spain, UBS economist Anna Titareva suspects that despite the recent decline in short-time work, there are still well over 20 percent non-working people, in Italy almost 20 percent, in France around 13 percent and in Germany around 12 percent.
The OECD has revised up its economic expectations for 2020: forecasts a historical contraction for GDP of 4.5%, but this figure is 1.5 points more benevolent than the previous forecast of the multilateral organization made in June. The agency recognizes that without the rapid and effective reaction of all economies, the recession would be of a greater magnitude.
OECD projections assume that there will be sporadic outbreaks of the pandemic and that these will be addressed with local measures, rather than with total closures of economies. In addition, they contemplate that there will be no widely accessible vaccine until the end of 2021.
The agency also points out that the economic downturn this year will be very different between countries. Thus, it has made upward revisions in China, the United States and Europe, while India, Mexico and South Africa show greater weakness than expected.
Thus, the Chinese economy is expected to grow by 1.8% this year, which represents a revision of 4.4 points upwards compared to its June estimates. The Asian giant will also be the only economy that will grow in a year dyed red. Meanwhile, the United States will contract by 3.8% in 2020, which represents an upward revision of 3.5 points. A contraction of 7.9% is forecast for the euro zone, which represents a positive correction of 1.2 points compared to the June forecasts.
Within the Monetary Union, the upward revision reaches Germany (by 1.2 points, down to a 5.4% drop in GDP this year), France (from 1.9 points, to a contraction of 9.5 %) and to Italy (0.8 points, down 10.5%). Only South Africa and Argentina will contract more than Italy.
The OECD does not make calculations for Spain in these forecasts, but according to those made by the Bank of Spain, the fall in domestic GDP this year will range between 10.5% and 12.6%, while Funcas estimates the shrinkage by 13%.
If the revision for 2020 is upward, the one corresponding to 2021 is downward: specifically, by two tenths, to expect a global expansion of 5%. But still, the level of activity at the end of next year is expected to remain below the figures for the end of 2019, and at considerably lower levels compared to pre-pandemic forecasts.
The agency expects the Chinese economy to rebound 8% next year, compared to the 5.1% growth that the euro zone will register and the 4% comeback that the United States will experience.
In any case, the OECD is open to future reviews. In this way, she admits that if the threat of the pandemic is reduced faster than expected, the improvement in confidence can boost activity significantly in the coming year. However, in the event of a new strong virus emergence or more important restrictive measures, growth in 2021 could be cut by two or three percentage points, with unemployment also being higher and with a longer period of low investment.
OECD chief economist Laurence Boone has advised policy makers to maintain their fiscal stimulus throughout 2021 and has warned of the dangers of trying to balance public finances ahead of time. Boone has advised governments not to repeat “the fiscal mistakes of the last crisis,” when stimulus was soon withdrawn and the road to recovery hampered.
INFOGRAPHIC – Recession less severe than expected or prolonged slump? A mixed picture according to the indicators.
By Florentin Collomp and Infographic Service
Is the worst behind us? After the shock of the lockdowns came out, economists and political leaders have been feeling the pulse of the economy all summer, in order to get an idea of the strength of the recovery. In this return, a mixed picture emerges. Some indicators point to a somewhat less severe recession than expected, while others point to a prolonged slump. At the risk of allowing geographic divergences to settle within Europe.
On average, euro area GDP fell by 11.8% in the second quarter. The rebound will therefore be strong in the third. “It makes sense to have an incredible number in the third quarter after a terrible second quarter, notes Philippe Gudin, economist at Barclays. We will have made up some of the lost potential, but not all of it. The big uncertainty relates to the fourth quarter. “
It’s mechanical. On leaving confinement, consumption soared in June, before settling down during the summer. The sales
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France’s head of state Emmanuel Macron wants to “revive” the domestic economy and promote the “ecological restructuring” of the country with a € 100 billion economic stimulus program that was presented on Thursday. Around a third of the money should therefore be invested in cycle paths, in the restoration of small railway lines that have been abandoned or neglected for decades in favor of automobile traffic, and in energy-saving construction measures. The “heroes” of the corona crisis in the hospitals and old people’s homes, who toiled for up to 15 hours a day in the service of health, are promised almost six billion euros – doctors, nurses and carers had asked for ten billion.
At just over half, according to the experience of those affected last month, Macron’s government will barely be able to employ enough staff and provide several thousand new beds. The cultural workers – theater people, filmmakers, cinema operators and musicians – should not be completely reassured either. According to the trade unions, the two billion euros that have been promised can at best be used to pay social assistance funds. Conclusion on the “Plan de relance”, which the President described as “unique” and forward-looking: It is nowhere near enough.
This is particularly clear from Macron’s “solidarity plan” for the “support” for the young adults and potential unemployed who are pushing for the job market. The hiring of young people is to be bought with around 6.5 billion euros, around 6.6 billion euros are to flow into the financing of short-time working, and a further 5.2 billion euros are to be fed to local authorities. All of this does not make the dark clouds on the horizon disappear. Despite the “one-time” plan, Macron and his new Prime Minister Jean Castex must prepare for the fact that the unemployment rate will rise to more than ten percent within the next two years. The finance ministry in Paris assumes that the country will lose more than 800,000 jobs in the coming year due to the consequences of the corona crisis alone; only around half – i.e. around 400,000 jobs – could possibly be saved with the present economic stimulus program.
France will spend more money on supporting industry. Macron wants to make the country “independent” for basic products for everyday life – food and medicines, for example – and therefore wants to bring production back to the republic. At the beginning of the Covid epidemic, health authorities did not even have enough masks available. There was a lack of equipment for doctors and nursing staff who tried to protect themselves against the corona virus with garbage bags. Around 35 billion euros are intended to help industry and agriculture to make production within the country’s borders palatable again – and to bring back at least part of the production that has been outsourced to low-wage countries in recent decades.
Those environmentalists who have been fighting against the shift in passenger traffic from rail to road for more than 30 years should have fun. The closure of a few thousand kilometers of rail is apparently to be stopped. Macron is now making 4.7 billion euros available for the expansion of the local route networks of the former state-owned railway company SNCF, which was partially privatized by the president against the bitter resistance of employees. A bitter joke for the train drivers and conductors at the SNCF after their hard struggle to keep the company and jobs to the limit of their financial resources.
The Paris business newspaper called a “curious semantic reversal” The echoes the president’s plan on Friday – the finance ministers who have been relying on neoliberal language and private entrepreneurship for more than 15 years in their luxurious concrete castle over the banks of the Seine suddenly realized that “the time for government spending has come”. The future, at least as far as Macron’s plan in its present form is concerned, evidently no longer lies in the complete elimination of “the state.” Economics Minister Bruno Le Maire summarized this new finding in a strange sentence: »From a political point of view, we could have made it a lot easier for ourselves and, for example, announced a reduction in VAT with exorbitant follow-up costs; but then we would not have prepared France for the demands of the 21st century «.
The German Federal Minister for the Economy, the conservative Peter Altmaier, today sent a reassuring message to the German business community by ensuring that there will be no second shutdown due to the coronavirus pandemic, stating that the situation is in the process of recovery and forecasting that the The recession will be less than expected, slightly greater than the one suffered due to the financial crisis of 2009. The German Minister of the Economy corrected down the forecast of a decline in Germany’s GDP to 5.8%, half a point less than in the calculations made in April, and only one tenth above the disaster suffered by the financial crisis 11 years ago.
Altmaier acknowledged that it is nevertheless the largest recession suffered by this country since World War II. The increase in the numbers of infections with the Sars-Covid-2 virus will be addressed this fall with specific and regional measures to avoid a new economic downturn at all costs, said the minister, who was convinced that the number of contagions after school holidays are over.
“The recession in the first half of this year has been much less than we feared,” declared the Christian-Democratic politician during the presentation at a press conference of the most recent economic forecast of the federal government, in which he commented that, after the paralysis of economic life in Germany in April and May, the recovery “is being faster and more dynamic than we had dared to expect”.
Peter Altmaier, however, lowered the Berlin executive’s expectations for next year. According to the calculations of his ministry, the German GDP will increase by 4.4% in 2021, when in the previous forecast there was talk of an increase of 5.2%. The minister explained that the graphical curve of the development of the German economy this year is shaped like a “V”, after having passed the inflection point at the beginning of the summer, and commented that in the second quarter of 2020 the country’s economic performance fell practically 10% compared to the previous quarter due to the massive limitations of public life.
Altmaier stressed that the recovery process of the situation will advance slower than desired and could be prolonged in time given the incidence of the pandemic in some important commercial partners of Germany, such as the United States and several countries of the European Union , including Spain.