All Eco TV Week

AllEcoTvWeek

About the surge in energy prices   10/22/2021
The actual rise is energy prices is larger than generally expected. While its inflationary nature is debated, the shock highlights the still high carbon dependency of our economies and the imperative need of energy transition.

Unease about the distribution of riks   10/15/2021
Although the forecasts from the IMF’s latest World Economic Outlook paint a quite favourable picture, there is unease about the distribution of risks. Risks to real GDP growth are tilted to the downside, a key factor being new Covid-19 variants that could hit countries with low vaccination levels particularly hard. Growth would also suffer if the increase in energy prices were to continue. Inflation risks on the other hand are skewed to the upside. Supply-demand mismatches may last longer than expected and the energy shock could cause second round effects. As a consequence, there is great uncertainty about the inflation outlook. Central banks will need to be patient, waiting for inflation to trend down, but also vigilant and ready to act if necessary. Their messages will be followed closely by financial markets, which, until now, have reacted in a calm way to the increase in inflation.

India: consolidation in progress   10/8/2021
Economic activity has accelerated since June in line with the decline in the pandemic. In FY2021/2022,  economic growth should reach 9.5% according to RBI’s projections. However this seems to be too optimistic as, at the end of September, only 20% of the population was fully vaccinated.

Deterioration of public finances in Colombia: why and should we be concerned?   10/1/2021
The deterioration of public accounts in Colombia can be explained as much by cyclical factors than structural ones. It is also symptomatic of a greater difficulty in enacting an ambitious fiscal reform especially in the face of rising social tensions in the country. Although public finances are unlikely to improve decisively in the short term, the country exhibits a number of strengths that should help contain the build-up of risks in the medium term. Colombia should be in a better position to ensure the sustainability of its public finances if it is better able to engage the population at large and generate greater consensus around fiscal issues. 

The extra deposits created will not evaporate   9/24/2021
In the wake of the Covid-19 crisis, bank deposits, which represent the main component of broad money, have seen extremely rapid growth in both the eurozone and the USA. The extra money created will not evaporate suddenly once the health protection measures are over or nonconventional monetary policies come to an end.

France: second phase of the crisis exit strategy   9/17/2021
As the economic recovery is confirmed, France can launch a new phase of the crisis exit strategy in order to continue the gradual removal of the safety net provided by emergency measures.

Growth in Turkey: Too much of a good thing?   9/10/2021
The Turkish economy has experienced a stellar growth during the 2nd quarter of 2021, compared with the same quarter a year earlier. A recovery is normal since the country experienced a wide lockdown in 2020Q2, but its size is impressive. However, the Turkish economy is facing at the same time a strong inflation that reached 19% in August 2021.

Fed’s Powell brings reassurance   9/3/2021
Fed Chair Powell’s speech at the annual symposium at Jackson Hole organised by the Federal Reserve of Kansas City was eagerly awaited by financial markets, which were hoping that he would shed some light on the Fed’s intentions of scaling back its asset purchases.

Saudi Arabia: Positive short-term prospects   7/30/2021
The year 2020 was difficult for the Saudi economy, but the outlook is positive in the short term. A twin shock hurt the economy: the Covid19 pandemic and more importantly the fall in oil prices. We had a direct impact on fiscal revenues and on economic activity. In addition the government had to accelerate the consolidation of public finances with a negative impact on household demand. The VAT rate has tripled and some allowances have been cut. The fiscal deficit reached a very high level at more than 11% of GDP and the economic recession has been the deepest for more than 20 years (-4.1%). The recovery should be moderate this year (2.3%) given the rebound in oil prices and higher production in line with the OPEC+ agreement. The fiscal deficit should reach around 3% of GDP. In the medium term, this difficult year may have had a positive consequence with the acceleration in fiscal consolidation. It is favourable to the diversification of government revenues. On the contrary, the uncertain oil outlook will continue to constrain the pace of economic reforms. Key words: oil prices, fiscal consolidation, economic reforms Summary: In 2020, the Saudi economy recorded a deep economic recession and a very high fiscal deficit. The economy should recover in 2021 with the rebound in oil revenues. The acceleration in fiscal consolidation will have positive consequences in the medium term, but an uncertain oil market outlook will continue to constrain economic reforms.

Outlook for the second half of the year: it’s not over   7/23/2021
A combination of positive developments has led in the first half of the year to a broad-based improvement in business and consumer sentiment in advanced economies: successful vaccination campaigns, a declining number of new infections, ongoing policy support and positive international spillover effects. Gradually, the ‘mechanical’ recovery in sectors which previously had suffered from restrictions is expected to lose steam. Supply bottlenecks and certain price increases may end up acting as a headwind. The growth cycle, despite a gradual slowdown, is far from over but neither is the fight against Covid-19. There is increasing concern that new variants would lead to precautionary behaviour, thereby weighing on certain spending categories. This concern has already triggered a significant decline in bond yields, despite concerns that in the US inflation might stay higher for longer. It also means that central bank policy guidance will be a key point of attention in the second half of the year.

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On the Same Theme

Unease about the distribution of riks 10/15/2021
Although the forecasts from the IMF’s latest World Economic Outlook paint a quite favourable picture, there is unease about the distribution of risks. Risks to real GDP growth are tilted to the downside, a key factor being new Covid-19 variants that could hit countries with low vaccination levels particularly hard. Growth would also suffer if the increase in energy prices were to continue. Inflation risks on the other hand are skewed to the upside. Supply-demand mismatches may last longer than expected and the energy shock could cause second round effects. As a consequence, there is great uncertainty about the inflation outlook. Central banks will need to be patient, waiting for inflation to trend down, but also vigilant and ready to act if necessary. Their messages will be followed closely by financial markets, which, until now, have reacted in a calm way to the increase in inflation.
The extra deposits created will not evaporate 9/24/2021
In the wake of the Covid-19 crisis, bank deposits, which represent the main component of broad money, have seen extremely rapid growth in both the eurozone and the USA. The extra money created will not evaporate suddenly once the health protection measures are over or nonconventional monetary policies come to an end.
Covid-19: new cases’ fall around the world 9/13/2021
Global Covid-19 case numbers have started to decline again after a rising trend lasting nearly two months. Some 4.2 million new cases were recorded between 2 and 8 September, a reduction of 6.3% on the previous week. This development was shared between all regions: Africa -25%; South America -16.2%; Asia -7.8%; Europe -2.3%; and North America -2.3%. The total number of deaths also fell over the same period. Meanwhile vaccination campaigns continue to gain ground, with 5.6 billion vaccine doses given by 8 September.
Outlook for the second half of the year: it’s not over 7/23/2021
A combination of positive developments has led in the first half of the year to a broad-based improvement in business and consumer sentiment in advanced economies: successful vaccination campaigns, a declining number of new infections, ongoing policy support and positive international spillover effects. Gradually, the ‘mechanical’ recovery in sectors which previously had suffered from restrictions is expected to lose steam. Supply bottlenecks and certain price increases may end up acting as a headwind. The growth cycle, despite a gradual slowdown, is far from over but neither is the fight against Covid-19. There is increasing concern that new variants would lead to precautionary behaviour, thereby weighing on certain spending categories. This concern has already triggered a significant decline in bond yields, despite concerns that in the US inflation might stay higher for longer. It also means that central bank policy guidance will be a key point of attention in the second half of the year.
Is there a risk of stagflation? 6/25/2021
The 1970s have gone down in history as an era of stagflation, defined as a period of slow or even negative output growth and inflation that is high by historical standards. Two supply shocks in the oil market are considered as a key cause but other factors also played a role. In the course of this year, the lifting of restrictions related to Covid-19 has caused an imbalance between supply and demand, leading to a significant pickup in inflation. There is concern that growth, after being particularly strong, will slow, whereas inflation might stay elevated for longer. This has given rise to comments that stagflation, albeit in a lighter version, could make a comeback. However, this risk seems limited.
Central bank digital currency: what are we talking about ? 6/10/2021
While central banks are considering whether (or not) to launch their own digital currencies so as to counter private crypto-assets, the design of these central bank digital currencies will be of the utmost importance with regard to their consequences on the financing of the economy and the monetary policy transmission.
PMI: price pressures continue to build, reaching very high levels 6/7/2021
The global manufacturing hardly moved in May, which shouldn’t come as a surprise, given its already high level. There was little change in the new export orders at the global level. 
Economic outlook: spring is in the air 4/9/2021
Economic statistics for the first part of this year are better than expected, including in Japan and the euro area. Moreover, this development is broadening in terms of sectors. Looking at business surveys, there is a growing feeling of beginning to “see the light at the end of the tunnel”.
Bitcoin’s buyer beware 3/15/2021
Based on an overview of the functions of a currency, cryptocurrencies should be considered as an investment instrument, rather than as an alternative to fiat money. Since the start of 2020, correlations between bitcoin and copper, equities and, in particular, breakeven inflation have increased. Probably, investors turn to bitcoin when inflation expectations are on the rise. Swings in investor sentiment also play a role. The extent of the change in the bitcoin price suggests that speculative waves are at work, driven by momentum buying and extrapolative expectations of price appreciation. When the fundamental value of an instrument like a cryptocurrency is very hard if not impossible to determine and when short-term price changes are a multiple of those observed in equity markets, caution should prevail when building and managing an exposure.
The bond market turmoil: causes and consequences 3/11/2021
In recent months, US government bond yields increased significantly on the back of higher inflation expectations but more recently, higher real rates have been the key driver. The latter development is in turn related to the prospect of massive additional fiscal stimulus. Unsurprisingly, the dynamics in the Treasury market have had global spillover effects, raising concern about an unwanted tightening of financial conditions.

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