I know how the almost pessimist approach of economists towards the future of economy makes you angry. And as we have already enough problems in our hands today, you’re upset by countless commentaries that are in fact “re-telling of the obvious”.
Believe me some of my colleagues are doing the best they can to catch a few good news. We are now only a handful of people trying to provide you with sane and realistic commentaries while avoiding illusions. We have no reason at all to be overly pessimistic since things are already bad as they seem.
I wanted to start off the week with some good news but, unfortunately, we keep receiving frustrating statements about the future of global economy.
For instance, Germany’s Kiel Institute for the World Economy announced that the German economy will shrink by nearly 7% in 2020, adding that the country will lose 390 billion euros over the next 9 months. Stating Germany, one of Turkey’s top export and import partners, will shrink by 12% in the second quarter, the Institute luckily expects a GDP growth above 6% in the following year.
Just as expected, the Bank of England left its policy interest rate unchanged, at 0.10%. Both the Fed and the BoE think that the circumstances are not mature yet to introduce negative “negative interest rates”. By the way, BoE added another £100 billion to bond-buying program, raising QE target to £745 billion. However, market chose to remain rather unresponsive to this decision.
“Nothing good can come from it, if everyone is a pessimist…”
Now, let’s take a look at the other side of the Atlantic: In the United States, another 1.5 million American citizens have filed for unemployment benefits in the week ending June 13, exceeding expectations for 1.29 million. Nevertheless, Applications for U.S. unemployment benefits continue to show a slow decline. Let’s be reminded that before the pandemic, weekly claims were around 200,000, lowest level of the last 50 years.
In Indonesia, a candidate for becoming the world’s 4th largest economy in 2050, government takes similar measures to improve economy. Central Bank of Indonesia lowered its policy interest rate and its 2020 GDP growth outlook for the first time in three months, expecting growth to expand by 0.9-1.9%.
Despite the Central Bank’s expectations, Indonesian Government hasn’t yet officially recognised a negative GDP growth since their expectations remain between 0% and 1%.
As the week begins, the current economic situation in Europe-America-Asia trio remains rather unsurprising. I for one believe that global economy will recover quite rapidly if a second wave of coronavirus does not strike.