By Jonathan Cable
LONDON (Reuters) – Britain will expand at its quickest pace in decades this quarter after shrinking at its fastest pace in centuries last quarter, a Reuters poll found, as vast swathes of the economy have reopened following a nationwide shutdown to control the coronavirus.
Despite near-term optimism, almost 85% of respondents, 32 of 38, thought the outlook for the British economy had stayed the same or worsened over the past month, with only six saying it had improved.
The virus has infected almost 15 million people across the world and Britain has the highest death toll in Europe – despite the government forcing businesses to close and citizens to stay home.
(Reuters Poll: UK economic and monetary policy outlook – https://fingfx.thomsonreuters.com/gfx/polling/qzjvqwkqavx/UK%20economic%20outlook.PNG)
But many restrictions have now been eased and people are emerging from their homes, returning to work and spending money again, so the economy was expected to expand 12.2% this quarter, the July 13-21 Reuters poll showed, better than the 10.5% recovery predicted last month.
That bounceback comes after an historic 18.9% contraction pencilled in for last quarter and nearly all economists who responded to an extra question said the biggest threat to the recovery would be a second wave of virus infections.
“The economy will almost certainly have imploded over Q2 as a whole. The good news is that in terms of the monthly trajectory, there is clear evidence that the economy has remained on an upward path since May,” said Philip Shaw at Investec.
“But the challenge of course is keeping the economy from running out of steam.”
This year, the economy was expected to contract 9.1%, the median in the poll of over 70 economists showed, and then recover to expand 6.0% in 2021. In a worst case scenario it will shrink 13.0% this year.
Official GDP figures said the economy grew a slower than expected 1.8% in May.
To tackle the hit from COVID-19 to the economy the British government has massively ramped up spending, borrowing 128 billion pounds ($163 billion) last quarter, five times the amount during the same period last year.
But only a slim majority said the Treasury’s response had been enough – 14 of 25 respondents to an additional question said.
“The authorities have done broadly what they needed to do,” said Peter Dixon at Commerzbank.
(Reuters Poll: UK economic recovery outlook – https://fingfx.thomsonreuters.com/gfx/polling/yxmvjrogevr/Britain%20economy.PNG)
Forming the centrepiece of the government’s support was a scheme to pay 80% of wage bills if staff were put on leave rather than let go. But that is due to close in October and unemployment was seen peaking at 8.0% in the fourth quarter.
The Bank of England chopped borrowing costs to a record low of 0.10% and restarted asset purchases. But no change in policy was expected at its next meeting on Aug. 6.
The bank rate will not rise until 2022, but an additional 70 billion pounds ($89 billion) will be added to the BoE’s existing 745 billion pounds quantitative easing programme toward the end of this year, the poll showed.
Another risk is the expiry of Britain’s transition period with the European Union at the end of the year, after leaving more than 40 years of membership in March.
The two sides resumed talks on Tuesday but while there has been little movement what divides them. Still, the aim of reaching agreement on future ties by October is ambitious but achievable, German Foreign Minister Heiko Maas said on Tuesday.
As has been consistent in Reuters polls since the June 2016 vote to leave the EU, economists almost unanimously expect the eventual relationship will be a free trade deal.
“Failure to sign a trade agreement with the EU in 2020 will go down as a major policy error. It is inconceivable to me that the British government would be prepared to take such a risk with the economy, particularly in the current climate,” Commerzbank’s Dixon said.
“But then Brexit and a rational approach to economic policy have never been natural bedfellows.”
(Reporting by Jonathan Cable; Polling by Mumal Rathore and Hari Kishan; Editing by Alison Williams)
GUEST COLUMN: Diversify the economy through clean growth – TheChronicleHerald.ca
By Kieran Hanley / Special to The Telegram
As the world battles through the pandemic, its nations are deliberating on what shape global economic recovery will take. There is a growing sense that investments should meet two tests: that they contribute to economic activity and jobs right away; and that they will provide longer-term benefits for the economy, the environment, and society. In short, economic recovery and “clean growth” should go hand in hand.
This is the case in Canada. Long before the pandemic, our federal government was aggressively investing in initiatives related to climate change, sustainability and clean technology. So, it is a safe bet to assume that its approach to economic recovery will follow suit. Influential groups like the Task Force for a Resilient Recovery say that building back better means “supporting the jobs, infrastructure and growth that will keep Canada competitive in the clean economy of the 21st century.”
For its part, Newfoundland and Labrador has been hit hard by not just the pandemic, but also the collapse of oil prices. The reality is that we need to take advantage of any lifeline available to us. And so, part of our economic recovery has to be making the most of any and all federal programs — many of which will have a clean growth twist. We need to be prepared for this.
Yet the opportunity for our province extends far beyond simply being reactive.
There are also opportunities for brand new industries that can put our province at the forefront of the energy transition and diversify our economy.
The pursuit of sustainability within our offshore oil and gas industry will lead to the development and application of new low-carbon products, services and processes that will not only be demanded worldwide and across multiple oceans sectors — but will also contribute to the long-term success of this industry here at home.
The accelerated electrification of our economy will contribute to mitigating the costs of Muskrat Falls. This means increasing the number of electric cars on our roads, converting our Metrobus fleets to run on electricity and switching buildings from fossil fuel-based heating sources to electric. This also means designing a future that involves electrified ferries, seaport and airport operations and industrial processes.
These are just two areas where clean growth perfectly aligns with existing provincial priorities and will create jobs. But there are also opportunities for brand new industries that can put our province at the forefront of the energy transition and diversify our economy.
The production of hydrogen is an important example. Hydrogen is a fuel that emits zero emissions and can be produced through low or zero-emissions means. The past year has seen rapid progress for this industry, with interest intensifying during the pandemic. Several countries are forcefully pursuing its production, with Canada set to announce a national strategy in the near future. Given our existing marine infrastructure and access to enormous renewable energy resources, Newfoundland and Labrador may be in an excellent position to become a global producer of hydrogen — as we are of oil today.
But to make the most of any of these opportunities, we need a plan. That is why in June, the Newfoundland and Labrador Environmental Industry Association (NEIA) submitted a series of recommendations for Newfoundland and Labrador’s economic recovery — with a key action being the creation of a “Clean Growth Directorate” within government. Between navigating resources, regulations, incentives and innovation supports, many government departments have a role to play in the pursuit of clean growth, but none are entirely responsible. A whole-of-government approach to clean growth — and meeting our net zero commitments — is required in order to attain the level of proactivity that is needed. With new provincial leadership comes an opportunity to take deliberate and targeted action.
The clean growth opportunity is immense. It not only provides environmental benefits, but also contributes to economic resilience in a world that is increasingly concerned with greenhouse gas emissions and environmental impacts. Newfoundland and Labrador is blessed with a wealth of resources and is home to a budding technology sector that can enable our province to become one of the cleanest jurisdictions on the planet and an inspiration to other regions around the world.
Let’s put people to work today, building the economy of tomorrow. NEIA stands ready as a partner in the pursuit of any and all options.
Kieran Hanley is executive director of NEIA, the Newfoundland and Labrador Environmental Industry Association.
Global economy faces challenges amid pandemic, de-globalizing trend: experts
The development of the global economy faces various challenges as the COVID-19 pandemic wreaks havoc worldwide and the de-globalizing trend is becoming ever stronger, experts said in an interview on Thursday with China Global Television Network (CGTN).
In the interview, Jimmy Zhu, chief strategist at Fullerton Research and James Early, CEO of Stansberry China, shared their views on how the world economy might evolve amid the pandemic and what the future path might be for the economic ties between China and the United States, the two major countries now accounting for over one-third of global economic output and over 50 percent of global growth.
Amid the pandemic, governments worldwide are striking a balance between reopening the economy and curbing the spread of the virus.
“Well, it’s a very difficult balance. In the beginning, people think, ‘Okay it’s a half-half’. But what we look at is once you need to open a business, especially the restaurants, the bars, it’s very easy to transition. So I think before the vaccine out finally, I mean I got to say, I hope it’s not, but it seems like it’s very difficult to balance the two. So sometimes the policymakers need to be a bit prudent or a bit flexible when dealing with such things,” Zhu said.
Beyond the epidemic, Early reckoned that the de-globalizing forces are growing worldwide, setting even more barriers for the free flow of trade.
“Well look, we will definitely have less of it and that’s just the bummer. As a simple example, I was looking at my iPhone and imagine if everybody had to make their own iPhone, it would just be so inefficient. Right? The globalization brings us great benefits. But to switch analogies, I was at the beach a few years ago and when I saw these little crabs and they were very timid. As soon as they got scared, they go into their hole. But then gradually they’d come back out again. And I think we’ll see the same thing with nations, meaning, we are de-globalizing, period. That’s happening, but it’s not really complete and it’s only going to probably be less than 10 year cycle, which is short in terms of humanity. And I think then things will start to move again. But it’s going to be a painful 10 years, and I think it’s going to teach us how precious that trade and globalization really is, because maybe we don’t value it enough right now,” said Early.
Argentine economy to shrink 12.5% this year, central bank poll says – TheChronicleHerald.ca
BUENOS AIRES (Reuters) – Argentina’s economy is likely to contract 12.5% in 2020, a central bank survey of economists showed on Friday, a slightly more negative outlook than a month earlier as the impact of the coronavirus pandemic hammers the South American nation.
The economic outlook in the monthly report polling 44 economists was down from a 12% estimated drop previously.
Economists predicted a larger fiscal deficit of around 2 trillion Argentine pesos ($27.49 billion) as the government steps up spending to reignite the economy after two years of recession and to recover from COVID-19.
Those polled forecast a deeper contraction in the second quarter, but had a more positive outlook for the third quarter, “indicating that the period of greatest impact of the pandemic has already been overcome,” the report said.
Argentina has registered 235,677 confirmed infections of COVID-19, with daily cases accelerating in recent weeks as the country has looked to ease some lockdown restrictions in place in and around Buenos Aires, the capital.
The country, which defaulted in May, reached a deal with creditors this week to restructure $65 billion in foreign debt.
The central bank survey also estimated inflation for 2020 at 39.5%, slightly down from its month-earlier forecast. The peso currency was seen rising to 86.4 pesos per dollar in December 2020 and 123.2 pesos per dollar in December 2021.
(Reporting by Maximilian Heath; Editing by Adam Jourdan and Leslie Adler)
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