Laden...
Click here for full report and disclosures
â Virus progress: Major European economies, along with the US and Canada, are managing to âflatten the curveâ of the coronavirus. The number of daily confirmed cases of COVID-19 has plateaued across the west – see chart. The progress remains tentative and subject to potential reversals. Still, it does support the hope that the number of daily cases could fall (further) soon. It has encouraged leaders on both sides of the Atlantic to discuss or even take the first steps towards lifting some of the harsh restrictions on daily life and economic activity.
â Latest on the lockdowns: Yesterday, US president Donald Trump announced a series of guidelines for states to lift restrictions. It is down to individual states to decide when to act. While some states will begin to open up cautiously sooner than others, as a best guess, expect most to wait until early May. In Germany, most small shops will reopen on Monday while some other restrictions on schools will be lifted gradually from 4 May. While Spain and Italy have eased restrictions a little, most measures will remain until early/mid-May – as in the UK and France. Thereafter, expect those countries to lift some key restrictions gradually – probably along the lines that Germany has set out.
â Rebound can begin in May: The harsh lockdowns are crippling economic activity. As a best guess, the hit to economic output is around 30% for most advanced economies while the restrictions last, with risks tilted to the downside. We expect a modest snapback once some measures are lifted. Shops that are currently closed should enjoy at least some level of business as soon as they reopen, for instance. With luck, the recovery can tentatively begin in May. Chances are that April will be the bottom of the coronavirus recession.
â On track for tick-shaped recovery: The plans to lift the lockdown gradually and in a series of steps is in line with our underlying assumptions for a tick-shaped rebound in Europe – that is, the current sharp downturn will be followed by a somewhat flatter upturn that ultimately goes beyond the pre-corona level of GDP. For major European economies, we expect GDP to surpass its late-2019 level roughly two years after the trough. Growth can remain modestly above-trend through 2023 and 2024 as the lagged impact of the monetary and fiscal stimulus continues to support demand.
â Second-wave risks? Governments face a tricky balancing act. If life returns to normal too fast, a potential second wave of infections that matches or even exceeds the first would require renewed harsh lockdowns. The very cautious approach to lifting the lockdowns, the better preparedness of healthcare systems, plus the changes to daily life – such as wearing masks in public – suggest that a major second wave can be prevented. The risk will be even lower in countries that test the most and take a thorough approach to contact-tracing. Nevertheless, a resurgence of the virus is the risk to watch. On top of the massive economic shock from the first wave, the economic damage and the risk of a financial crisis would be even more severe during a second round of harsh lockdowns.
Chief Economist
+44 20 3207 7889
Senior Economist
+44 20 3465 2672
European Economist
+4420 3207 7859
This material is intended as commentary on political, economic or market conditions for institutional investors or market professionals only and does not constitute a financial analysis or a research report as defined by applicable regulation. See the "Disclaimers" section of this report.
The commentary included herein was produced by Joh. Berenberg, Gossler & Co. KG (Berenberg). For sales inquiries, please contact:
Phone: +44 (0)20 3207 7800
Email: [email protected]
BERENBERG
Joh. Berenberg, Gossler & Co. KG
Neuer Jungfernstieg 20
20354 Hamburg
Germany
Registered Office: Hamburg, Germany
Local Court Hamburg HRA 42659
For Berenberg the protection of your data has always been a top priority. Please find information on the processing of personal data here.
Any e-mail message (including any attachment) sent by Berenberg, any of its subsidiaries or any of their employees is strictly confidential and may contain information that is privileged or exempt from disclosure under applicable law. If you have received such message(s) by mistake please notify the sender by return e-mail. We ask you to delete that message (including any attachments) thereafter from your system. Any unauthorised use or dissemination of that message in whole or in part (including any attachment) is strictly prohibited. Please also note that any legally binding representation needs to be signed by two authorised signatories. Therefore we do not send legally binding representations via e-mail. Furthermore we do not accept any legally binding representation and/or instruction(s) via e-mail. In the event of any technical difficulty with any e-mails received from us, please contact the sender or [email protected]. Deutscher disclaimer.
Click here to unsubscribe from these emails.
Laden...
Laden...
