Economic and Strategy Viewpoint - December 2020

  • News that a Covid-19 vaccine is on its way has provided a boost to the outlook for the world economy and spurred a significant rally in equity markets. There is, at last, some light at the end of the tunnel as the vaccine should eventually bring a return to normal social behaviour and an end to the restrictions which remain in place in many parts of the world.
  • In the near-term, the virus's re-emergence has forced a return of restrictions, especially in Europe. Most countries in the continent are almost certain to double dip in Q4, and possibly Q1 if lockdown restrictions remain. The good news is that restrictions are lighter than earlier in the year, and so disruption to activity should be reduced and temporary.
  • In the US, a deal in Congress for the next fiscal package is likely to follow in early 2021, but the delay and smaller than previously expected deal alongside rising infection rates mean there is a danger of following Europe into a double dip.
  • Amongst emerging markets, China is leading the way and, after expanding this year, is likely to grow by around 9% next year. With the exception of China, which is likely to experience a short bout of deflation, most EMs are likely to experience a transitory period of higher inflation led by food. But once this passes and growth settles to more normal rates few central banks will be in a rush to tighten policy, particularly if governments begin to repair fiscal positons.


Read the full report

Economic and Strategy Viewpoint - December 2020 19 pages | 612 kb