BIZweek n°367 5 nov 2021
BIZweek n°367 5 nov 2021
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  • Parution : n°367 de 5 nov 2021

  • Périodicité : hebdomadaire

  • Editeur : Capital Publications Ltd

  • Format : (260 x 370) mm

  • Nombre de pages : 9

  • Taille du fichier PDF : 1,7 Mo

  • Dans ce numéro : 10 scénarios qui pourraient impacter la croissance et l'inflation.

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VENDREDI 05 NOVEMBRE 2021 BIZWEEK ÉDITION 367 Global risk scenarios Political frlilitary Economic Environ menta I Worseriing US.Ch i ria ti4en force full clecoupl i rig Fastrnonetary tighteriing leads ta stockmarket crash Widespread social unrest weighs on global recovery Variants of coro riavi rus emerge an cl proue resistant to vaccines Source : The Ému:1mM Intelligence Unit. ELII-China tien worsen significantly LA TOUR ECONOMIC INTELLIGENCE UNIT RISK OUTLOOK 2022 10 scenarios that could impact global growth and inflation The Economic Intelligence Unit expects the post-pandemic recovery to continue in 2022, with global GDP expanding by 4.1%. However, this rebound will mask great variations in the pace of recovery across different regions. In addition to this baseline outlook, they are also tracking a host of scenarios that could derail the post-pandemic recovery and have an effect on global business operations Scenario one : Worsening US-China ties force a full decoupling in the global economy The US and China are vying for global influence. The US president, Joe Biden, is trying to convince «like-minded» (mostly Western) countries to collaboratively put pressure on China. This has included restrictions in the areas of trade, technology, finance and investment, along with sanctions, forcing some markets (and companies) to choose sides. Although most evident in the technology arena, there is a risk that this strategy will encompassindustrial or consumer-facing sectors. In an extreme scenario, this could lead to a neutral stance becoming economically prohibitive for third countries, dividing China-supporting and US-supporting economies. Full global economic bifurcation would force companies to operate two supply chains with different technological standards. Implementation of 5G telecommunications networks could be postponed in some countries, and sanctions by China would heighten uncertainty surrounding global trade and investment. Scenario two : Unexpectedly fast monetary tightening leads to a US stockmarket crash Supply-chain disruptions, higher energy prices, ultra-loose monetary policy and a recovering real economy have all contributed to a sharpuptick in US inflation in 2021. Although many of these factors are likely to ease as the US economy rebalances post-pandemic—indicating that spiking inflation will not be long-lasting—they nonetheless give cause for the ghter financia I conditions fierai l recovery emerging markets Federal Reserve (Fed, the central bank) to start tightening monetary policy gradually by tapering its asset purchases. However, if slow and clearly signaled monetary tightening fails to rein in inflation in the medium term, a rise in interest rates by mid- 2022 may be necessary. Given that US stock price/earning ratios are currently higher than before both the 1929 and the 2007-08 crashes, accelerated interest-rate increases could be enough to initiate a sharp stock market adjustment. The high number of retail investors means that falling stock prices would weigh heavily on consumer spending, possibly halting the US economic recovery and risking a recession. Scenario three : A property crash in China leads to a sharp economic slowdown A Chinese property giant, Evergrande, has already missed some repayments on debt totalling about US$300bn, and, given exposure to the company across much of China’s economy, its potential default represents a serious risk of financial contagion. The state tightly controls China’s financial markets, and its willingness to step in and bail out firms means that it has the tools to isolate financial distress, making a large-scale financial crisis unlikely. However, many of China’s real estate firms are similarly overleveraged. If worsening real estate sentiment leads to a string of defaults across China’s real estate sector, it will become much harder to contain. At the very least, this would lead to a collapse of property prices, with investment contracting, the government having to bail out overexposed banks and households, and in many cases household wealth taking a significant hit. This combination could drive China’s real GDP growth to well below the 6-7% normof recent years. Weak MMMMMMMMM A property crash in China leads to a sharp economic slowdown Cyberwar erupt3 Coriflict enu pts between China and Taiwan Severe droughts prompt famine growth would, in turn, instigate a global economic downturn, with commodity exporters particular affected by a period of much weaker demand from China. Scenario four : Tighter domestic and global financial conditions derail the recovery in emerging markets Inflationary pressures stemming from rebounding commodity prices have already led some emerging markets, including Brazil, Mexico, Russia, Sri Lanka and Ukraine, to raise monetary policy rates in 2021. In a context where sovereigns have grown increasingly leveraged as a result of the pandemic, interest-rate normalisation will feed into higher debt-service costs for governments. This could ratchetup pressure for aggressive pro-cyclical fiscal consolidation that ultimately sets back the recovery of emerging countries. In particular, the potential for US bond yields to rise faster than expected in the coming months could drive higher emerging-market risk premiums, leaving them vulnerable to sudden drops in capital inflows. Risks will be especially elevated in countries where indebtednessin foreign currency is particularly high, for example in Argentina and Turkey, where bond sell-offs could trigger currency and/or debt crises. Scenario five : New Covid-19 variants emerge that prove resistant to vaccines The pace of vaccine rollout is the main variable behind economic forecasts. One of the main risks for the global recovery 3 Cont’d on page 4

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