The global economy is gradually showing signs of recovery after a major decline in the first half of the year. The growth of the economy is expected to continue from the second half although the labour market will take a long time to recover. Macroeconomic influencers share their views on the Covid -19 impact.
Erik Meyersson, senior economist at Svenska Handelsbanken, a Swedish bank, shared a report on the latest forecast issued by the bank. The report notes that the global economy is showing signs of recovery after a historic fall in economic activity in the first half.
The impact of the pandemic, however, has been different across countries. While Nordic countries managed to handle the pandemic better, the European Union and the US have been severely impacted.
The report notes that global growth is expected to decline by 4.3% in 2020, followed by a 5.2% growth in 2021 and 3.5% growth in 2022. Infection rates and lockdown restrictions, however, will play a major role in the growth of the global economy.
🚨@handelsbanken's Global Macro Forecast August 2020 is out! 🚨
The Corona Rollercoaster
• Onwards and upwards after a historic fall
• Decline in global interest rates behind the stock market rally
• It's a long way back to normal for the labour market https://t.co/hFY1zarqZi pic.twitter.com/HOZRFZOPXg
— Erik Meyersson (@emeyersson) August 26, 2020
Adam Tooze, director of European Institute, shared an article on how China’s monetary stimulus is constrained despite the impact of the Covid-19 pandemic. The article attributes this to the People’s Bank of China’s (PBOC) policies adopted during the early 2000s. The policies limited the appreciation of yuan, while China had a huge trade surplus and the PBOC’s assets increased by 70% of GDP in 2008.
Compared to other banks such as the Federal Reserve, the European Central Bank and the Bank of Japan, which have increased purchase of government bonds, the PBOC has not added to its assets. The PBOC’s balance sheet is currently the same as the Fed at 35%.
The improved economic conditions in the country as the pandemic remains under control and the lower level of interventions by the bank are the main reasons for the constrained spending, the article adds.
By 2008 as a result of years of intervention to hold e.r. down, the balance sheet of China’s PBoC had swollen to 70% of GDP. Today it is down to 35%. Its reaction to 2020 shock has been very modest. If intervention happening it is off the books. https://t.co/YMAhrokZde pic.twitter.com/bQCsHq2zyW
— Adam Tooze (@adam_tooze) August 26, 2020
BLackSUnrise, an economist, shared an article on the declining value of the euro despite the steps taken by the European Central Bank (ECB) to prevent the European economy from slipping into a recession.
The ECB has purchased approximately €3tn of assets through quantitative easing programme and interest rates have entered the negative territory but the European economy has shown little signs of recovery.
The article notes that the current rebound of the euro is only temporary due to a weak US dollar, which could rebound any time undermining the value of the euro.
#EU – #Germany has given up the ghost on trying to control the #ECB’s monetary excesses. There seems to be a palpable sense of “if you can’t beat them, join them” for the sake of presenting a united front and avoiding a damaging public rowhttps://t.co/7J1RM09vIB
— BLackSUnrise (@Ebony_Sunrise) August 26, 2020