19th October 2020
Watching and waiting
A noticeable winter chill is in the air. The threat of fresh lockdown measures has become reality, with
renewed restrictions coming into force not just in the UK, but across most of continental Europe as well.
But unfortunately, the UK – once again – is faring particularly badly in virus terms.
At the same time as this bleak news, Brexit negotiations have once again turned sour. Boris Johnson’s selfimposed 15 October deadline has come and gone. Latest reports point to more than stalling in talks, after
Johnson told the nation on Friday to “get ready” for a no deal Brexit – except that capital markets appeared
utterly unconvinced – rallying throughout the day as if a deal is very close. The Prime Minister’s chief
negotiator David Frost claimed to be “disappointed” with the outcome from last week’s European Council
meeting. Among other things, fishing rights remain one of the big sticking points, with Johnson and French
President Macron apparently digging into their respective sides.
IMF: Austerity is not the answer this time
The International Monetary Fund (IMF) created considerable waves last week with mixed messages in its
biannual world economic outlook. IMF economists now expect a decline in economic activity of 4.4% for
2020, with the slight increase from June’s forecast owing to better than expected growth in the second
quarter of the year. The higher base effect from this year is partly why expectations for next year’s growth
have tempered somewhat. But downgrades to 2021’s growth outlook also reflect the expectation that virus
restrictions of some kind will continue to affect our lives well past January.
That sombre note resonates through much of the IMF’s findings. Although global growth for this year may
not be as bad as one may have thought, the -4.4% is still the most severe contraction since the great
depression and puts the -1.7% contraction of 2009, that followed the Global Financial Crisis, firmly in its
place. Emergency support from governments has worked to curtail the classic near-term impact of this
deep recession in terms of dropping consumer demand from unemployment. But the IMF warns that the
virus crisis will cause “lasting damage” to living standards across the world.
Indian equities have been on a roll. Since the global sell-off through the end of February and March, Indian
stocks have recovered over 40%. That still leaves the Indian market down around 2% year-to-date, but
compared to other emerging markets, India is faring well, outrunning China particularly over the past couple
of weeks. One of the most impressive features of the recovery is its consistency. India is now one of the
best-performing emerging markets when measuring on a one month, three-month or six-month basis.
From the titbits of news we see here, this may come as something of a surprise. The world’s second-most
populous nation was deemed at huge risk from COVID; its densely-packed conurbations, and lessdeveloped healthcare infrastructure, make it an unfortunate place to be in a pandemic. Sure enough, in
absolute terms the country has suffered heavily in the last six months. Over seven million virus cases have
been reported in total, and more than 111,000 people have lost their lives to the disease – although, relative
to its vast population, this still means that they have been less affected than for example Germany.