As the International Monetary Fund slightly upgraded its global economic outlook last week, the reality on the ground appears to be less positive thanks to a surge in Covid-19 infections in many countries.
With policymakers appearing to be running out of ammunition at such a critical moment, thoughts of V-shaped recoveries are again going into abeyance.
As so often happens when the IMF releases its World Economic Outlook, the situation being faced by many countries appeared to be at odds with its overall messages. While the IMF reduced the extent of the global contraction expected this year to -4.4 per cent from -5.2 per cent in June, and signalled a still relatively strong rebound in 2021 of 5.2 per cent (albeit down 0.2 per cent from its June forecasts), the world was beginning to confront a second phase of the pandemic, which has seen more lockdowns and restrictions.
With policymakers appearing to be running out of ammunition at such a critical moment, thoughts of V-shaped recoveries are again going into abeyance
Admittedly, the IMF acknowledged the likely uneven nature of its rebound forecast, but as winter approaches, the conditions for the world economy continuing its recovery – seen during the summer – appears to be getting more difficult, not better.
Activity rebounded in the middle of the year, reflecting pent-up consumer and business demand along with unprecedented fiscal support measures designed to provide temporary income support. It also reflected quick and aggressive monetary policy responses from the world’s central banks. The global fiscal stimulus amounted to $12 trillion, while central banks expanded their balance sheets by $7.5tn.
However, with lockdowns and restrictions now returning in many countries and with no visibility yet over the availability of an effective vaccine, there is a significant risk that economic activity will soon run out of steam and begin to slump again. And this time around, global policymakers are also running out of ammunition to confront it.
Policymakers face a much more challenging situation in terms of providing ‘‘Phase 2’’ policy support than they did during the first phase of the pandemic, given the sharp increase in budget deficits and debt levels as a percentage of gross domestic product. Monetary policy has also long been perceived as running out of effectiveness given the widespread prevalence of negative or zero interest rates.
The IMF expects debt levels to go up significantly to about 125 per cent of GDP in advanced economies next year, and up to 65 per cent of GDP in emerging market economies. However, more debt can act as a drag on economic growth and undermine the effectiveness of other policy steps, with highly indebted countries often the worst performing in terms of economic growth.
For now, the IMF noted that low or negative interest rates should contain debt service costs, especially for advanced economies, indicating that now is not the time to engage in austerity to restore public finances back to health. However, looking ahead, it also observed that the ability of fiscal policy to provide further support might become more limited.
Fiscal support packages are certainly becoming less generous than they were earlier in the Covid-19 crisis and in the US, the timeline for Congress to pass a meaningful fiscal package is now fading as the November 3 presidential election comes into view. This puts the burden onto the central banks again, but what can they do?
The Bank of England is apparently preparing UK banks for negative interest rates, but the US Federal Reserve is more likely to go down the road of more quantitative easing programmes alongside credit support and easier terms and conditions for its loans. This may limit the upside for bond yields, but investors might be right to wonder what real difference this will make.
With analysts again dusting off their lexicons for the likely shape of the economic recovery from V to U to W or K, some commentators abandoned alphabetic metaphors completely and instead described the UK recovery, for example, as likely to be ‘‘pear-shaped’’. Whatever shape the recovery turns out to be, the headwinds to markets are clearly returning as vulnerabilities increase, leaving investors quite likely to remain nervous and probably defensive.
Tim Fox is a prominent regional economist and financial markets analyst
COMPANY PROFILE
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
Developer: Ubisoft Montreal / Ubisoft Toronto
Publisher: Ubisoft
Platforms: Playstation 4, Xbox One, Windows
Release Date: April 10
MATCH INFO
Uefa Champions League semi-finals, first leg
Liverpool v Roma
When: April 24, 10.45pm kick-off (UAE)
Where: Anfield, Liverpool
Live: BeIN Sports HD
Second leg: May 2, Stadio Olimpico, Rome
ROUTE%20TO%20TITLE
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
UAE currency: the story behind the money in your pockets
Haircare resolutions 2021
From Beirut and Amman to London and now Dubai, hairstylist George Massoud has seen the same mistakes made by customers all over the world. In the chair or at-home hair care, here are the resolutions he wishes his customers would make for the year ahead.
1. 'I will seek consultation from professionals'
You may know what you want, but are you sure it’s going to suit you? Haircare professionals can tell you what will work best with your skin tone, hair texture and lifestyle.
2. 'I will tell my hairdresser when I’m not happy'
Massoud says it’s better to offer constructive criticism to work on in the future. Your hairdresser will learn, and you may discover how to communicate exactly what you want more effectively the next time.
3. ‘I will treat my hair better out of the chair’
Damage control is a big part of most hairstylists’ work right now, but it can be avoided. Steer clear of over-colouring at home, try and pursue one hair brand at a time and never, ever use a straightener on still drying hair, pleads Massoud.
THE DETAILS
Deadpool 2
Dir: David Leitch
Starring: Ryan Reynolds, Josh Brolin, Justin Dennison, Zazie Beetz
Four stars
Most sought after workplace benefits in the UAE
- Flexible work arrangements
- Pension support
- Mental well-being assistance
- Insurance coverage for optical, dental, alternative medicine, cancer screening
- Financial well-being incentives
Honeymoonish
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MISSION: IMPOSSIBLE – FINAL RECKONING
Director: Christopher McQuarrie
Starring: Tom Cruise, Hayley Atwell, Simon Pegg
Rating: 4/5
SERIE A FIXTURES
Saturday (All UAE kick-off times)
Cagliari v AC Milan (6pm)
Lazio v Napoli (9pm)
Inter Milan v Atalanta (11.45pm)
Sunday
Udinese v Sassuolo (3.30pm)
Sampdoria v Brescia (6pm)
Fiorentina v SPAL (6pm)
Torino v Bologna (6pm)
Verona v Genoa (9pm)
Roma V Juventus (11.45pm)
Parma v Lecce (11.45pm)
UAE currency: the story behind the money in your pockets
Stage 5 results
1 Tadej Pogacar (SLO) UAE Team Emirates 3:48:53
2 Alexey Lutsenko (KAZ) Astana Pro Team -
3 Adam Yates (GBR) Mitchelton-Scott -
4 David Gaudu (FRA) Groupama-FDJ 0:00:04
5 Ilnur Zakarin (RUS) CCC Team 0:00:07
General Classification:
1 Adam Yates (GBR) Mitchelton-Scott 20:35:04
2 Tadej Pogacar (SlO) UAE Team Emirates 0:01:01
3 Alexey Lutsenko (KAZ) Astana Pro Team 0:01:33
4 David Gaudu (FRA) Groupama-FDJ 0:01:48
5 Rafał Majka (POL) Bora-Hansgrohe 0:02:11
Nepotism is the name of the game
Salman Khan’s father, Salim Khan, is one of Bollywood’s most legendary screenwriters. Through his partnership with co-writer Javed Akhtar, Salim is credited with having paved the path for the Indian film industry’s blockbuster format in the 1970s. Something his son now rules the roost of. More importantly, the Salim-Javed duo also created the persona of the “angry young man” for Bollywood megastar Amitabh Bachchan in the 1970s, reflecting the angst of the average Indian. In choosing to be the ordinary man’s “hero” as opposed to a thespian in new Bollywood, Salman Khan remains tightly linked to his father’s oeuvre. Thanks dad.
ETFs explained
Exhchange traded funds are bought and sold like shares, but operate as index-tracking funds, passively following their chosen indices, such as the S&P 500, FTSE 100 and the FTSE All World, plus a vast range of smaller exchanges and commodities, such as gold, silver, copper sugar, coffee and oil.
ETFs have zero upfront fees and annual charges as low as 0.07 per cent a year, which means you get to keep more of your returns, as actively managed funds can charge as much as 1.5 per cent a year.
There are thousands to choose from, with the five biggest providers BlackRock’s iShares range, Vanguard, State Street Global Advisors SPDR ETFs, Deutsche Bank AWM X-trackers and Invesco PowerShares.
