Tourism is the main transmission channel of the Covid-19 pandemic to the Moroccan economy. Activity has been at a standstill since March and will remain so until May, at least. The losses will be significant in a sector that contributes to more than 8% of GDP, which is the highest level in the region. On a more positive note, two-thirds of the tourist season comes from June onwards, which might coincide with the easing of restrictions on travel in some countries even if the recovery of the activity would be gradual. The slump in tourism activity will weigh on growth and external accounts. The sector accounts for 15% of current account receipts. However, external stability does not look under threat. Forex reserves are comfortable and external debt is moderate
Following the example of the ECB for the significant institutions[1], the Bank of Italy has decided to recommend to banks under its direct supervision (the less significant institutions) not to distribute or commit distributing dividends at least until 1 October 2020[2]. Moreover, share buy-backs will have to be restricted and less significant institutions in Italy will have to adopt "prudent and farsighted" variable-remuneration policies. The five largest Italian banking groups, which account for almost half of the total assets of the domestic banking system, are thus likely to mobilize (in addition to the benefits that were not intended to be distributed) EUR 4.8 billion of additional common equity Tier 1 in 2019[3], representing 4.1% of its current outstanding amount (EUR 116
The PMI indices published this week give an early insight into the scale of the economic shock from Covid-19. The composite indices for Japan (35.8), Germany (37.2), France (30.2), the UK (37.1) and the US (40.5) all slumped in March. The euro zone composite PMI was the lowest ever recorded at 31.4. The deterioration was particularly marked for the sub-indices relating to employment and orders for goods and services. Figures for April, whilst remaining at historically low levels, are expected to show increasing divergence between the regions. In East Asia, internal demand should start to pick up, as activity starts to normalise in China. Conversely, the epidemic is spreading more rapidly in the US, India and Africa; meanwhile, many European countries remain in lock-down.
The most recent PMIs announced the shock earlier this month: industrial production fell strongly in January-February 2020, declining by 13.5% year-on-year. China also registered a very severe contraction in total exports (-18% y/y), fixed-asset investment (-24.5%) and volumes of retail sales (-23.7%). Such a collapse in economic activity is an unprecedented situation in China, which is expected to record a contraction in real GDP in Q1 2020. Activity has been recovering gradually in recent days, and a rebound in real GDP growth is expected in Q2 2020, notably supported by the authorities’ stimulus policy measures
In the end, the US Federal Reserve (Fed) did not wait for the next corporation tax payment deadline in April before intervening in the money market. In an attempt to stave off the risk of pressures on the market as a result of the coronavirus outbreak, it increased the scale of its repo transactions on Monday 9 March. At the end of last week, demand for cash from primary dealers far outstripped what the Fed was offering. Although the Fed has injected nearly USD 480 billion in additional central bank money since mid-September, the liquidity position (immediately available cash) at major US banks has not improved. On the one hand, bank reserves with the Fed have increased by only USD 280 billion, due to the growth in the Treasury’s general account
The weight of the tertiary sector in the Spanish economy has grown steadily over the years, and this growth has accelerated in the last five years. Value added for the services sector (volume terms) has increased by 16.2% since Q3 2008, the previous peak achieved before the financial crisis. Conversely, the industrial sector remains 6.9% below its 2008 level. This structural transformation could reflect the growing role of new technologies and the digital economy as engines of growth for both consumption and investment choices. This trend is reflected not only in Spanish domestic demand, but also in the country’s international trade. Indeed, Spanish exports of services have risen 46 % (volume terms) since the autumn of 2008.
A large number of economic sectors have been struggling with the impact of the Covid-19 epidemic on Chinese consumer demand, transport, tourist flows and industrial production chains. Over the past month, the People’s Bank of China (PBOC) has loosened monetary and credit conditions in order to support local corporates, help them cover their cash requirements et encourage a rapid recovery in activity. PBOC has injected a large amount of liquidity into the financial system, reduced interest rates – monetary rates, medium-term lending facility rate and benchmark lending rate – and announced special loans to firms directly affected by the virus outbreak. As a result, the weighted average lending rate, which has declined since Q2 2018 (from 5.94% to 5
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