- Our updated calendar identifies the top events that should be on your radar this week.
- We also provide an outlook overview region by region for the rest of the year.
- In our episode of the week ahead podcast we are looking at the top three market moving themes that should be on your radar.
Our view in a nutshell
- The recovery of real economy will be gradual, although pent-up demand could push up apparent real growth rates above potential.
- We expect core CPI inflation to continue to decelerate and to plunge around -1.0% y-o-y in Q1 2021 led by lower oil prices.
- The cumulative ¥233trn policy package will help keep the economy out of a vicious cycle but have a limited impact on demand.
- The risk is renewed yen appreciation, caused by deepening US-China tensions and further risk averse moves in markets.
- GDP growth should improve in H2 2020, from Q2 lows, but the pace of recovery will differ among economies.
- We expect Northeast Asia to outperform Southeast Asia and India, due to COVID-19 containment and a resilient tech cycle.
- Emerging Asia (India, Indonesia, the Philippines) remains vulnerable amid rising cases and due to limited policy support.
- Beyond pent-up demand, fragilities remain due to the knock-on effects on the labour market, SMEs and on bank asset quality.
- We expect further rate cuts in China, Malaysia, the Philippines and India, while rates are likely to remain on hold elsewhere.
- China: We expect sequential growth momentum to weaken in H2 and believe Beijing cannot yet afford to stop policy easing.
- Korea: Growth may pick up in Q3 but remain subdued due to weak global demand and growing concern over a second virus wave.
- India: COVID-19 amid a weak financial sector to trigger a contraction in 2020 and easy policies – monetary, fiscal and liquidity.
- Indonesia: Slow COVID-19 containment implies a larger growth shock, higher fiscal risks and more balance-of-payment pressure.
- Australia: We see a shallower cycle, with a less-deep trough but still a long path back towards normal, with little inflation.
- We expect a short, but steep, recession in H1 2020 before a gradual recovery aided by fiscal and monetary accommodation.
- Responding to a significantly weaker outlook, we expect the Fed to remain at the ELB through 2021.
- The Fed will implement credit facilities already announced and ensure that long-term rates do not constrain the recovery.
- We expect an additional $1.5tn in fiscal stimulus from Washington, but failure to extend support is a rising risk.
- The unemployment rate will decline gradually, reaching 10% by end-2020 and 7% by end-2021, as the labor market remains weak.
- Core inflation will likely be weighed down by COVID-19’s impact on service prices and excess labor market slack.
- Notable risks include a second wave of infections as well as corporate credit and financial sector stress.
- As lockdowns are lifted we expect the euro area economy to recover, but ultimately fall short of a full V-shaped rebound.
- The combination of a protracted demand shock and energy prices below pre-pandemic levels suggest a disinflationary effect.
- The risk to our unchanged ECB view is for a further PEPP expansion if economic conditions do not allow tapering this year.
- At its trough (April/May) UK GDP was down 25% and it looks likely to remain below Q4 2019 levels in the coming two years.
- While pent-up demand and policy stimulus should be supportive, we expect the UK’s recovery to look like a truncated-V.
- Our central view is for no further BoE stimulus. QE should end in December and we argue against negative official rates.
- The risk of a Brexit cliff edge at the end of 2020 has risen, but talks are ongoing and the outcome remains highly uncertain.
For more information read our weekly report here
Chief US Economist
Chief UK & Euro Area Economist
Chief China Economist
Chief Japan Economist
Head of Global Macro Research and Co-head of Global Markets Research
Chief Economist, India and Asia ex-Japan