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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

9/8/2021
More tempered optimism 8/30/2021
According to INSEE’s preliminary estimate, French GDP grew 0.9% q/q in Q2 2021. This outcome was slightly better than expected, as we had forecast a 0.8% rise and INSEE a 0.7% increase. Although growth in France was significantly weaker than across the euro zone at large (2% q/q) or the United States (1.6% q/q), it was still a decent figure given the circumstances. Indeed, despite the third lockdown in April, it lay well inside positive territory. The lockdown’s negative impact on economic activity was even more modest than that of the second lockdown. 
French labour market: are the signs of a return to better fortune already there? 8/25/2021
To determine whether the French labour market has returned to good health, we can use the two gauges retained by the French government in the unemployment insurance reform: 1/ the number of “category A” jobseekers must have decreased by at least 130,000 over six months; 2/ hiring reports for jobs lasting more than 1 month (excluding temporary work) must also exceed a 4-month moving average of 2.7 million contracts. In June 2021, both these criteria were met. The improvement is less surprising for hiring reports than for registrations with the “Pôle Emploi” employment service, with the bar seemingly more easily reachable for the former than for the latter. This first positive sign[1] still needs to be confirmed over the coming months but things seem to be on the right track. This good news comes in addition to that concerning private sector payroll employment, which in Q2 2021 returned to its pre-crisis level of Q4 2019, as well as the unemployment rate, which did not escalate as feared following the Covid-19 crisis: at 8% in Q2 2021, it is also at its pre-crisis level (itself the lowest since 2008). These favourable results are largely attributable to the emergency measures taken to cushion the impact of the crisis. A future rise in the unemployment rate cannot be ruled out but the situation is more likely than not to continue to improve, driven by the rebound in growth and the “France Relance” stimulus plan.   [1] The positive sign observed in October 2020 is misleading and short-lived as it is based on a favourable base effect.
Robust rebound 7/7/2021
Based on May and June business confidence surveys, the French economy has been rebounding more vigorously than expected from the third lockdown. We have raised our Q2 growth forecast, from near zero to near 1% QoQ. In Q3, the mechanistic rebound would bring growth to about 3% QoQ. Growth is expected to ebb thereafter as the catching-up effects dissipate, although it should remain high, bolstered by the fiscal impulse. The downside of the vigorous upsurge in demand is that it is squeezing the supply side, which is less responsive. The ensuing supply chain constraints, higher input prices and hiring difficulties are all sources of friction that must be monitored since they could hamper the recovery. GDP growth could average 6% in 2021 (an optimistic forecast that is a half point higher than the June 2021 consensus), and will remain strong at an estimated 4.6% in 2022. In our eyes, the economic risks are balanced: the unlocking of forced savings that have accumulated over the past year is an upside risk, while supply-side tensions and pricing pressures are downside risks. Although the Covid-19 pandemic has diminished significantly, the health risk has not completely disappeared given the rapid spread of variants. 
7/6/2021
Business sentiment at the highest level since summer 2007 6/28/2021
Our Pulse continues to show a significant improvement in France’s economic situation in recent months compared to the previous three months. For activity indicators, the blue area largely surpasses the area marked by the dotted line, whereas for the confidence surveys, it exceeds or is very close to the grey hendecagon that delineates the long-term average.
France: economy has the wind of optimism in its sails 6/18/2021
The economic indicators available at this mid-point of the year suggest that the French economy is bouncing back strongly as it comes out of its third lockdown. Granted, there are a few negative numbers in the mix. But these are economic activity data from April, most of which still bear the traces of lockdown.
6/16/2021
France: a majority of State-Guaranteed Loans to SMEs were taken on a precautionary basis 6/9/2021
One year after the introduction of State-Guaranteed Loans (SGLs), 39% of managers of the SMEs that took them out have indicated that they have made little or no use of the funds, whilst barely one-third stated that they had used the majority of their loan. This precautionary behaviour led companies to hoard all or part of their SGL in order to build up a liquidity reserve under favourable terms. Meanwhile, the share of managers who expect to repay their loans in full over several years has increased (41% in September 2020 to 56% in April 2021), whilst the proportion expecting to make at least partial repayment in 2021 has decreased (from 36% to 23% respectively). The proportion of companies considering that they will not be able to repay their loan in full has remained fairly stable since the mechanism was introduced (5% in April 2021). With the final subscription date set at 30 June 2021, the EUR 20 bn in Recovery Participatory Loans (“prêts participatifs Relance”) and the Recovery Bonds (“obligations Relance”) will ensure – for eligible companies and until 30 June 2022 – that there is a smooth transition to the ending of Covid support measures for company financing
France: start of the recovery and crisis exit strategy 5/21/2021
At the same time as France’s economic recovery is taking shape, the government is also developing its crisis exit strategy, i.e. the way in which the safety net of emergency measures will be gradually withdrawn as the recovery progresses. This will be a tricky task.

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