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rssFitch affirms France rating at ‘AA’ but lower its outlook from stable to negative
Fitch Ratings has affirmed France at ‘AA’ but cites (amongst other factors) the substantial worsening in public finances and economic activity expected this year due to the COVID-19 pandemic for its lowering of the outlook to negative.
- The combination of much reduced economic activity due to containment measures introduced from March and government policies to support the economy in the period of enforced reduced activity will sharply increase government borrowing and indebtedness. This deterioration of France’s public finance metrics will happen in the context of already high debt levels in comparison with rating peers, limited progress in fiscal consolidation since the global financial crisis, and moderate real economic growth.
That’s a summary, the report also notes:
- France’s ratings are underpinned by a large, wealthy and diversified economy, strong and effective civil and social institutions and a track record of macro-financial stability. Public finances, and particularly the high level of government debt, remain a rating weakness relative to the ‘AA’ category.
More at that link above
German stats office says that Q2 forecasts are for around -10% decline in GDP
Some comments by the German statistics office
- How Q2 turns out depends in part of the easing of restrictions
Most institutes are pinning the economic contraction in Germany to be somewhere between 10% to 12% in Q2, but either way we all know that it is going to be record-breaking bad considering the lockdown measures and impact of the virus outbreak in the region.
The focus now is whether or not all of the recent progress can translate into a better economic performance in Q3 and Q4. Any real risks of a secondary virus outbreak will throw a real spanner in the works and lead to more concerns about the projected recovery.
Fiscal deficit feared to rise to 7.9%
With the government’s Rs 20 lakh crore stimulus package, the country’s fiscal deficit is likely to be more than double to 7.9 per cent in the current financial year, according to an SBI research report.
The report had earlier estimated the fiscal deficit to be 3.5 per cent of GDP this fiscal.
The government has announced a cumulative package of Rs 20 lakh crore, which is nearly 10 per cent of GDP to provide relief to various segments of the coronavirus-hit economy.
“After taking into account cash outflow of these measures as well as the previous and the recent excise duty hike and DA freeze (amounting to 0.8 per cent of GDP), we now revise our baseline fiscal deficit (excluding extra budgetary resources (EBR)) to 7.9 per cent of the revised GDP in FY21 from 3.5 per cent earlier, owing to lower revenues and higher expenditure against the backdrop of Covid-19 pandemic,” the report said.
🇯🇵 #JAPAN APR PRELIMINARY MACHINE TOOL ORDERS Y/Y: -48.3% (largest decline since Sep. 2009) V -40.7% PRIOR
there’s going to be no v-shaped recovery this year – it will take several years
Chart of the day! Wall Street vs Main Street: 30%+ rally vs 30 million+ unemployed
Stanley Druckenmiller says negative interest rates make no sense
The Druck has no truck with subzero rates!
- stimulus programs are pretty ‘anti-capitalist’
- stimulus programs not building future wealth
- stimulus will be deflationary, not inflationary
- US is likely to see higher taxes, more regulation
- a “V” shaped recovery is a fantasy
Druckenmiller was speaking at an event for The Economic Club of New York – summary remarks via Bloomberg
+50 years of QE in ancient Rome..
German health ministry: Increase in virus reproduction rate doesn’t mean an uncontrolled outbreak
The health ministry reaffirms that it is taking the situation very seriously
A key development in the latest coronavirus update in Germany is that the virus reproduction rate saw an increase to 1.13 as of yesterday. Although the measure does come with a bit of lag, it is still a bit of a concern as it exceeds the key threshold of 1.00.
Merkel had previously stated that the country’s healthcare system would reach its capacity by October with a virus reproduction rate of 1.10 but this is a slippery slope to be going down. An increase to 1.30 would mean the healthcare system is maxed out in June.
Despite the figure jumping, I would say we’ll have to see how the trend continues over the next week or so before reaching any real conclusions. If the infection rate remains above 1.00 then, it could very well be a setback for Germany and its plans to reopen the economy.