Economic outlook S2 2020 | Long-lasting crisis effects versus continued massive economic support

Part 3 : long-lasting crisis effects versus continued massive economic support

Even if, by year-end, the economy is running much closer to near-normal levels than to the extraordinary lows experienced in the spring, the year-on-year decline will still be the equivalent of a major recession.

As of : September 2020

The full impact of the crisis has yet to unfold. Bankruptcy suspensions in many countries are concealing the effect of the crisis on the whole productive apparatus and on the employment situation. In Europe, although short-time working schemes have helped limit the rise in unemployment, the picture continues to worsen despite the economic rebound. In the United States, of the 13.5 million unemployed in August, 6.2 million were classified as temporary layoffs, but they could become permanent.

As of : September 2020


As of : September 2020

While the full effect of the crisis remains uncertain, the massive fiscal and monetary response should continue to fuel the recovery. The announcements made by Jerome Powell in Jackson Hole suggest that the FED’s supportive monetary stance is here to stay. In addition, the developed world’s low interest rate policies are easing the financial burden attached to the ever-higher levels of public debt that are the flipside of implementing fiscal measures on a totally unprecedented scale.

Fiscal tightening remains unlikely in the short term. Instead, support measures are being stepped up, including the extension of short-time working provisions and the introduction of fresh recovery packages. Negotiations for a new support package in the United States are however in stalemate. Although all these support provisions are an unprecedented response to an unprecedented crisis, we could also be shifting towards a paradigm of sustained higher government spending.

All these measures should enable the developed markets to return to their pre-COVID levels by the end of 2021.


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The opinion expressed above is dated September 2020 and is liable to change. Latest available data is used.

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