Limiting global warming will require huge investments, which will partly have to come from the public sector. This could lead to a crowding-out effect. Higher public borrowing requirements could push up interest rates and weigh on private investments. In the near-term such a risk seems remote. On the contrary, there could be a crowding-in effect with a reduction in climate-related risk and positive second-round effects from green public investments stimulating private investments. To reduce the risk that financial markets would exclusively focus on the impact on public indebtedness, governments should communicate clearly on the nature of their investments, insisting that they should have a return which is a multiple of the borrowing cost.
Real GDP growth reached 18.3% year-on-year in Q1 2021 and 0.6% in quarter-on-quarter seasonally-adjusted terms (according to China’s NBS). The latest activity indicators as well as our economic Pulse are strongly biased by major base effects between the first months of 2020 (when lockdown measures brought business to a standstill) and the first months of 2021.
In the retail and leisure sectors, which are still hit by health restrictions, footfall improved in developed countries during the week of 9-16 April compared to the previous week, especially in the UK, which reported a big improvement in footfall (from -51% to -34% compared to the baseline*). This can be attributed to the reopening of bars and restaurants on 12 April. Footfall also improved in Italy (-51% to -40%), Germany (-47% to -40%) and Belgium (-43% to -38%). In France, footfall increased very slightly and is still the lowest in Europe (chart 3).
