Page 25 - bneMag bne_December 2020_20201201

bne December 2020
Cover Story I 25
2020 has been one of the worst should bring Russia’s – and the world’s
years in living memory. Worse
than 2008, which has earned
the moniker “Great Financial Crisis”
to follow on from the Great Depression of the 1930s. The year started with
a growing panic caused by a looming global climate crisis that was quickly followed in short order by multiple shocks from a collapsing oil price
to a global pandemic with a liberal sprinkling of increasingly illiberal democracies, several wars and persistent terrorist attacks. That’s not to mention US president Donald Trump – arguably the worst president in US history.
"This is the worst crisis since the Great Depression, and it will take significant innovation on the policy front, at both the national and international levels to recover from this calamity," the IMF said in a recent blog post.
But take heart. As 2020 draws to a close 2021 is already looking like it will be
a lot better. There are now four competing vaccines to deal with the coronavirus (COVID-19) pandemic that will start
to be available in December. Oil prices are recovering to reasonable levels. Economies around the world are already starting to recover and the International Monetary Fund (IMF) predicts global growth for next year. The climate crisis remains a problem, but the reduction in travel has already helped reduce emissions and bought a little extra time. Terror, illiberalism and the wars will also not go away, but some economic prosperity will help to ameliorate those problems, too.
“Our base case assumes the launch of mass vaccination against COVID-19 sometime in 2Q21-3Q21 and a ‘victory’ over the pandemic in late 2021 or
early 2022. In the short-term, the epidemiological situation will likely remain rather complicated, but infection rates should slow significantly in Russia, Europe and the US with the approach of spring and summer,” BSC Global Markets chief economist Vladimir Tikhomirov said in a note at the end of November.
“The turning point should come around March-April 2021 when a reversal in the base factor and the approach of spring
– GDP growth rate back to black. These positive changes should be supported
by the mass vaccination of the global population from mid-2021. Russia’s economy should get a double boost from rising levels of domestic activity in the services, trade and investment areas, as well as from positive shifts in external factors (higher global demand will support commodity prices and should trigger more activity from Russian exporters),” Tikhomirov added.
Indeed, some analysts are arguing that 2021 might be the start of a huge multi- year long boom as a new super cycle starts. Equity markets are likely to see a big relief rally – especially in Emerging Markets (EMs). As populations emerge from their artificial hibernation – both official and self-imposed – a year’s worth of pent up demand for shopping, eating out and holidays will be unleashed that will give everybody’s economies a large impetus. The same is true at corporate level where delayed fixed investment plans will be reactivated, hopefully starting a virtuous circle of investment-growth-profits-wage hikes-spending turning.
On top of that there will be the govern- ment-lead fiscal stimulus initiatives that will lift growth. The EU has borrowed an unprecedented $150bn that it is using to support member states and those in the Balkans will receive aid equivalent to a third of GDP in some cases. In general borrowing has soared to new all time highs as governments and companies around the world top
up on debt to get themselves through the COVID-slowdown.
Indeed there are many signs that the coming recovery is already underway as some investors begin to position themselves for a dramatic change in the mood music.
“The trio that has injected optimism into the risk trade remains alive and well. Indeed, still operative are the prospects for a COVID vaccine much sooner than expected, expectation of central bank stimulus (US Fed stands ready, as per FOMC minutes) and an improving global economic growth
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