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GROWTH JUMPS TO 0.4% IN THIRD QUARTER OF THE FISCAL YEAR Published on 3 Mar 2021 by Johanna MELKA
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In Q4 2020, the third quarter of the 2020/21 fiscal year to 31 March 2021, India officially came out of recession. Real GDP was 0.4% higher than in Q4 2019. The recovery has been driven by an increase in government investment and a rebuilding of business inventories. In contrast, consumer spending – the biggest component of GDP – fell, whilst inflationary pressures have eased since November. Activity in the services sector was still down by 1%, while the agricultural and construction sectors recorded an acceleration, as did manufacturing, albeit to a lesser extent.

Economic indicators for January remain on the right track. Output in core industries recorded a positive growth for the second month in a row; goods freight accelerated, car sales increased strongly and unemployment dropped below its rate of a year ago (6.9% in February). However, the fourth consecutive monthly contraction in loans to companies offers little prospect of a recovery in private sector investment. Although a mechanical rebound in growth is expected in 2021/2022, stimulating private investment will be essential to boost medium-term growth and the level of employment without undermining the public finances.

While the first repayments of State-Guaranteed Loans should take place at the end of March 2021, the amounts granted reached a cumulative sum of EUR 132.2 bn as of 12 February 2021 according to the Banque de France.

Since their introduction, the SGLs have benefited more broadly the branches most penalised by the COVID-19 pandemic. Unsurprisingly, the accommodation and food service activities, which are still subject to administrative closures, are thus among those that have made the most intensive use of SGLs[1] in terms of  amounts granted and number of beneficiaries.

Our graph illustrates the general observation that the greater the drop in value added in 2020, the greater the use of SGLs. For some branches, recourse to the SGLs was greater than the decline in value added, reflecting opportunistic strategies linked to the low cost of the SGLs or precautionary behaviour (the SGLs are intended to compensate for a possible loss of activity subsequent to the time of their subscription, without this loss having occurred subsequently). It should also be underlined that general developments in a branch are likely to obscure major disparities between companies.

 

 

[1] The intensity of recourse to the SGLs is the ratio between the share of the total outstanding amounts of SGLs granted to a branch and the share of the total value added produced by this branch.

WORLD MERCHANDISE TRADE QUICKLY BACK TO PRE-PANDEMIC LEVELS Published on 17 Feb 2021 by Raymond VAN DER PUTTEN
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World merchandise trade has recovered much quicker from the steep fall at the outbreak of the Covid-19 pandemic than anticipated. In March and April 2020, at the height of the crisis, trade was almost 20% lower than a year earlier.

Despite the continuation of the lockdown restrictions and distancing rules in large parts of the industrial world, world trade has continued to expand. In November 2020 (latest data available), merchandise trade was back at the level at the end of 2019. After the financial crisis in 2008, it took more than two years for trade in goods to return to the pre-crisis level. The reason for the quick recovery in goods trade is due to the special nature of the shock, which affected in particular services such as retail trade and the catering industry. Government support measures have eased the impact on the economy, thus allowing goods imports to recover relatively fast.

The strong rebound in trade flows was noticed in container shipping. Recently, the large Danish international shipping company A.P Møller Mærsk reported an almost doubling of net operating profits in Q4 2020. Given bottlenecks in supply chains and equipment shortages, the company expects Q1 2021 to be even stronger than Q4.

Despite the rapid recovery of trade in goods, certain internationally traded services such as travel and tourism have continued to suffer, largely because of travel restrictions. For example, Frankfurt Airport reported a fall in the number of air travelers by 80% in January 2021 from a year earlier. By contrast, cargo was up by 18%.

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