- Italy: few ambitions from the new budget framework
Italy: few ambitions from the new budget framework
Monday 21 October 2019
Research / Market
On 30 September the newly formed Italian government released an update to April’s Economic and Finance Document, with new fiscal plans for the years 2019 to 2022 and changes to the underlying economic assumptions. The Update Note to the budget shows little ambition in strengthening growth or shoring up public finances for now and can be seen as a transitional budget, aimed at restoring confidence in Italy’s commitment to comply as much as possible with the EU framework.
China’s growth tremors: risks, opportunities and the road ahead
Soft landing and light policy support. In terms of Chinese growth, we see the rate continuing to slow. Chinese GDP growth rose 6.0% in the third quarter of 2019 (Chinese authorities forecasted a range of 6.0%-6.5% YoY), the slowest pace since the early 1990s. Moving into 2020, we do expect that the new growth target will be set around 6.0%, if not lower, at between 5.5% and 6.0%, and our current forecast is confirmed at 5.8% YoY. Exports unsurprisingly have been weak, private capex has slowed notably, and public infrastructure has not picked up as expected. Going forward, we expect public infrastructure capex to accelerate, and the tight real estate policy stance to potentially moderate. Chinese policy mix remains stimulative, though in a very limited way so far and far away from the massive stimulus implemented in recent years.
High Yield: deep diving needed due to a more uncertain outlook
Global growth has been slowing since 2018, due to a combination of factors, including trade wars – with consequently slower global trade -- past US Fed tightening, and rising geopolitical risks. This slowdown has become more pronounced in the last couple of quarters, especially in the most open economies, such as Europe and some EM, while the US economy has remained relatively more resilient despite losing momentum.
Emerging Markets Charts & Views - A tug of war between weaker growth and looser policies
Emerging economies have faced a backlash in the last few months as a consequence of the global economic weakness and the uncertainty related to global trade. This weighed on the performance of EM equities in the third quarter, although they recovered somewhat in September. EM debt proved more resilient, supported by investors’ appetite for yield. Idiosyncratic events (Argentina, Saudi Arabia and Turkey, to name a few) also impacted the overall more fragile environment for EM. As a consequence, we have revised down our EM GDP growth forecast to 4.2% in 2019 and 4.4% in 2020, from 4.3% and 4.5%, respectively, with significant country divergences.