eco TV Week

Special Edition – 2021: hopes and challenges


2021 is a year of hope with the arrival of vaccines. Health-related and economic uncertainty should ease significantly, and better visibility will help boost consumer and business confidence and thus drive economic growth. It is also a year of hope for the climate thanks to European initiatives and the prospect of a change of policy direction in the US. But these hopes bring challenges. How will we manage government debt? How might financial markets react if growth surprises on the upside?


TRANSCRIPT // Special Edition – 2021: hopes and challenges : January 2021

François Doux : In 2021, it will be all about the vaccine. There will be less uncertainty on the economic front.  But what will each of our economists focus on?  

Let's hear them.


William De Vijlder : In developed countries, the year 2021 should begin with some hesitation. We see infections and restrictions. But the number of infections will slowly decrease and all eyes will be fixed on the growing vaccination rate. We will also have the support of budgetary and monetary policies.

All these factors added together, we will see household and business confidence at higher levels.  We may expect an increase in consumption and even, at the end of the year, an increase in business investments.

In conclusion, we will go through two phases, a phase of hesitation followed by a phase of determination.


Jean-Luc Proutat : In the United States, 46th President Joe Biden will have to make budget arbitrations to exit the sanitary crisis. And maybe, he will have to go a step further and tackle the debt issue. Maybe, he will also have to deal with financial instability.

Markets have already celebrated the New Year. And even if we have better prospects, 2021 will remain a year of convalescence.

And last point, the United States will be back on the international scene to discuss issues such as climate change.


Hélène Baudchon : In France, in 2021, we should have a relatively strong growth following the huge recessionary shock in 2020. This growth will be driven by the recovery of household consumption. People will be able to tap into the large forced savings built-up during the lockdowns.

The other major point will be the dynamics of investment. It will be a sign of confidence and of the efficiency of the French recovery plan.


Louis Boisset : 2021 is a key year for the ECB. The conclusions of its second strategic review will be revealed in the middle of the year. At this point, we are expecting new narratives: first, an emphasis on a symmetrical inflation target and then on employment objectives. We are expecting discussions on the coordination between fiscal and monetary policies and on the role of monetary policy to tackle climate change.


Guillaume Derrien : In Spain and in Italy, in 2021, there will be two main issues. First, public deficits should remain high next year because emergency aid during Covid-19 will be extended and because the national recovery plans will be launched. This could heighten the tensions with Northern European countries which have a much better fiscal position. The second issue is linked to the recovery of the tourism sector. It will have a large impact in terms of employment and growth, in Spain in particular.


Hubert de Barochez : In the United Kingdom, Brexit will be a key issue in 2021. We anticipate that the country’s exit from the European Union will have big consequences for its economy. In the short term, there will be some disruption at its borders.  And in the long term, the productivity rate will probably decline.

In our view, that will have consequences for both fiscal and monetary policies.


François Faure : In emerging countries, market confidence have returned late 2019 as reflected by portfolio investments inflows.

In Asia, growth is driven by external trade hence a first question: is the gap going to widen between this zone and the others? There are three major points to keep in mind.

First, will emerging countries manage this year to control fiscal deficits? Beware of the increase in bond yields that might weigh on the debt burden.

Second, we had cases of debt restructuring and even default in commodity-exporting low-income countriesWill they multiply?  

Third, the debt increase for households and corporates. Will the banking systems be able to manage it?


Christine Peltier : In China, we will pay attention to the details of the new five-year plan that will be displayed during the National People's Congress in March.

The Chinese authorities have already revealed the major priorities of this plan. They aim to promote “a dual circulation economic model” that is based on two major pillars of growth.

The first pillar is the domestic market. What measures will be taken by the authorities to boost household demand in 2021?

The second pillar is the export sector. The emphasis will be on self-sufficiency and technology innovation. What will be the impact of this strategy on China’s relations with its main trade partners?


Stéphane Colliac : In Central Europe, in 2021, we will observe once more a strong exporting sector in spite of a difficult context.

We will also note an increase in private consumption that is supported by public finances thanks to some fiscal leeway.

In Turkey, in the oncoming year, we will be able to witness the effectiveness of the reforms announced at the end of 2020. If they are implemented, we will have more stable growth in the next decade.


Salim Hammad : In Brazil, we cannot expect a dynamic growth profile, beyond the mechanical rebound, in spite of a very accommodative monetary policy. Over the first half of the year, issues of political economy will be front and centre. In particular, discussions around fiscal rules will dominate headlines and are likely to cause agitation in financial markets.

Finally, we will have to monitor the increasing dichotomy between the real and financial spheres.


Raymond Van Der Putten : Last year, we noticed a record drop in greenhouse gas emissions.

After the pandemic, this year, there is a risk of returning to the old trajectory. Only the European Union has put the emphasis, in its recovery plan, on the transition to a green economy.

Hence, it is useful to follow the announcements that will be made at the COP26 in Glasgow.

We are not sure that the new objectives will allow to limit global warming to 1.5 degree.


François Doux : Go to BNP Paribas Economic Research website to find all the publications of our economists, our videos, EcoTV Week, EcoTV and our podcast, Macro Waves.

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