We expect a fiscal Q3 GDP figure of -1.8% (y/y) on 26 of February. In general, the outlook for India is improving as the economy picks up and the prospect of additional fiscal support as presented in the FY22 budget. At the same time the policies of the RBI and the government do entail a dose of future risk.
Momentum for green hydrogen is growing in North-West Europe. Almost every week, a new initiative is announced. The Netherlands has a clear lead over Germany, but the latter is catching-up fast.
The Eurozone economy contracted with 0.7% in the final quarter of last year and with 6.8% in 2020 as a whole. Going forward, the apparent resilience of the economy bodes some comfort, but will not prevent another contraction in the current quarter.
The German economy expanded by 0.1% in the fourth quarter. Going forward, there are still some major risks however. Transport prices for goods from China have quadrupled recently and pose a threat to the strong trade performance in Germany.
Spain is in the midst of a heavy third coronavirus wave. The government hopes it can avert a full lockdown, but the economy will suffer anyhow. We think the economy contracted in 20Q4 and pencil in another contraction for the current quarter.
The Italian government survived the confidence votes in parliament, but its mandate has weakened. Policymaking will be somewhat more difficult, while the third COVID wave pushes the economy back into recession.
While we expect Biden’s policies to boost economic growth, we do not expect them to end the vicious cycle of polarization and social unrest that is undermining the country. In foreign and trade policy, Biden is likely to return to a multilateral approach.
The EU-China Comprehensive Agreement on Investment (CAI) should improve EU companies’ access to China and ‘level’ the playing field. However, its commitments are ‘weak’ and the envisaged dispute resolution mechanism lacks teeth.
A new strain of coronavirus has been found in Japan while a third wave of cases sweeps over the country. That will cause the economy to contract in the first quarter of this year. In that sense, the situation will get worse before it gets better.
We expect Indian GDP to contract by -8.4% (y/y) in fiscal 20/21 and grow by 9.7% (y/y) in fiscal 21/22. The INR is projected to appreciate in tandem with the expected global economic recovery and boosted by optimistic global investor sentiment.