Economic developments in India are mixed. On the upside, there is the prospect of an effective vaccine, fresh government stimulus and better economic performance than anticipated. On the downside, there is a risk of a second wave and the economy continues to struggle with high inflation.
Economic Comment Dutch version
Hard economic data usually comes available at quite some lag. To gauge the economic impact of COVID-19 we look at more timely economic indicators that are readily available. Data on traffic jams, international flights, and restaurant bookings are released sooner and more frequently. This helps us to better monitor the economic situation during the COVID-19 crisis.
Under a Biden administration foreign and trade policy will remain focused on meeting the challenge of China as the main rival of the US. However, the fiscal policy plans of the Democrats are likely to be stopped by the Republicans in the Senate.
Coronavirus cases are still increasing in Japan, which is holding back its economic recovery. Relations with China are still tense. If the economy weakens further, the Bank of Japan might start another round of stimulus.
China’s new Five Year Plan signals the country’s increased focus on self-reliance. Meanwhile, the economic recovery is continuing. Tensions between the US and China are here to stay, irrespective of who the new US president will be.
We expect the economic impact of the partial lockdown to be smaller than the intelligent lockdown last spring, but consumer spending and investments will be hit hard. Because of the partial lockdown, the government announced extra support in the third support package.
Although the number of new infections was limited at first, the situation is quickly worsening in Germany. Consequently, the government has imposed additional containment measures. We expect the government to continue to support the economy.
The policy plans of the next president of the United States has consequences for the Indian economy in terms of the USD/INR trajectory, trade and GDP metrics and geopolitics.
Special Dutch version
The EU Taxonomy is a new ‘green language’ that helps to identify sustainable investments. Large public-interest companies within the EU will soon be required to report which part of their turnover and expenditure is in line with this.