"V-shaped" recovery is on track amid vaccine hope and Biden's victory
Goldman Sachs expects a sharper "V" recovery in the global economy than consensus forecasts of other economists suggest, and now the recovery could be even stronger than expected as hopes that a coronavirus vaccine could soon see the light.
Global stocks skyrocketed Monday after Pfizer and BioNTech announced their potential vaccine is more than 90% effective in preventing Covid-19 among those with no confirmation previous infection. Doctor Albert Burla (Albert Bourla), Pfizer Chairman and Chief Executive Officer, Calls Results «a significant day for science and humanity».
This news follows immediately after the alleged victory Joe Biden in the US presidential election, and both events could significantly affect global growth projections.
The outlook for the global economy released over the weekend for 2021 analysts Goldman stressed that the fiscal policy of the Democrats may encounter resistance, as they are unlikely to receive a majority in the Senate. Despite this, analysts are still awaiting the implementation of the $ 1 trillion economic stimulus package in the United States, it is possible that this will happen even before the expected inauguration of the new US President on January 20..
Chief Economist at Goldman Sachs Jan Hatzius (Jan Hatzius) and his team suggested that more important for growth prospects will be the new wave of coronavirus infections sweeping across Europe and the United States, with a number of large European economies returning to measures partial isolation.
This led to a downward revision of Goldman's global growth estimates in the fourth and first quarters of 2021, but the bank remains confident that the global economy will outperform the consensus forecast of economists surveyed by Bloomberg..
The Bank predicts a 3.9% decline in global GDP in 2020, slightly better than the consensus forecast of 4%, followed by 6% growth in 2021 (versus 5.2%) and 4.6% in 2022 (against 3.7%), while risks are still shifted in the opposite direction.
International Monetary Fund (IMF) predicts a 4.4% contraction in 2020 and a 5.2% recovery in 2021.
«Just as the global economy recovered quickly (albeit in part) from the spring restrictions, we expect the current weakness to give way to much stronger growth when the European restrictions are lifted and the vaccine becomes available.», – Hatzius said in the report.
«Assuming that United States Food and Drug Administration (FDA) approves at least one vaccine by January and mass immunization of the general population will begin shortly thereafter, we expect growth to accelerate sharply in the second quarter. Consistent with this point of view is the apparent lack of «scarring effects» from an earlier decline in GDP».
Biden lays out plan for economic recovery amid pandemic
Goldman expects central banks in developed markets to maintain a peaceful bias over the next few years, and the US Federal Reserve, European Central Bank and Bank of England will only start raising rates again in 2025..
«The main exception is China, where production has already returned to pre-pandemic levels, loans are growing rapidly, and fiscal policy remains highly expansionary.», – added Hatzius.
Assuming that vaccine and policy news outweighs the risk of lockdowns in the Northern Hemisphere, Goldman currency analysts have stuck short in a basket of emerging market currencies and G-10 (Group of 10 major economies) against the US dollar..
Amid Bank's New Economic Forecasts, Goldman Co-Director on Global Monetary Policy, Rates and Emerging Markets Strategy Zach Pandle (Zach Pandl) and Kamakshya Trivedi (Kamakshya Trivedi) set a 12-month target for the euro at $ 1.25, the RMB against the dollar at 6.30 per dollar and Japanese yen up to 100. They expect the greatest overall return from a short position in the Russian ruble against the US dollar.
Short positions in currencies involve borrowing a currency and selling it at the current market rate in order to buy it back at a lower price, essentially betting that the currency will depreciate..
«Given the high valuation and low interest rates in the United States, this economic forecast, in our opinion, should lead to a significant depreciation of the US dollar next year.», – said Pandle and Trivedi in a Sunday note.
They predict next year a 6% depreciation of the nominal, trade-weighted US dollar, and is currently holding short dollar positions against the Canadian and Australian dollars along the block line G-10 and South African rand, Indian rupee and Mexican peso in block of emerging markets.