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German crisis rebounds during Merkel’s twilight months: Eco Week

By on May 22, 2021 0

Germany’s economy is going through a time of change as it tries to shake off the coronavirus crisis as Chancellor Angela Merkel’s era draws to a close.

In just three months, on Wednesday, voters will choose a new government in an election that bodes well for a turning point as she leaves a political vacuum after 13 years in power – accompanied by a sense of unfinished business to reorganize the continent’s growth engine.

The task that will now pass to Merkel’s successor, who must face the challenge of rethinking Europe’s largest economy and seizing the opportunities of the post-crisis world, without losing its advantage.

While the pandemic can be a catalyst for change, it still won’t be easy.

First, the country’s recovery has yet to fully take root, data expected this week to show the extent of economic damage caused during lockdowns at the start of the year. At least business confidence on Tuesday could continue to surpass pre-crisis levels.

The shape of the next coalition could then determine how quickly Germany will regain its usual fiscal rectitude. Too rapid a reduction in support could hurt the rebound, a risk highlighted by the International Monetary Fund last week. Finance Minister Olaf Scholz, Merkel’s Social Democratic partner in government, could share his views on the matter in a conversation with Bloomberg on Tuesday.

After that, the new government will need to deploy both imagination and a willingness to rethink a growth model based on high-end manufacturing, in a global economy where the greatest prosperity is generated in even more lucrative fields such as than technology.

Germany’s commercial backbone has enormous potential, as brought to you by BioNTech SE, whose innovative vaccine was the first in the Western world to be approved for use. But even with such winners on board, the race to forge a prosperous future will be fierce.

What Bloomberg Economics Says:

“Germany’s Ifo survey will provide more clues about how the economy is going. The economic situation has been weighed down by extensive restrictions on public life. The outlook is brighter against the backdrop of expectations for a robust recovery spurred by pent-up demand as the brakes ease following a resumption of the country’s immunization program. “

–For a complete overview, Click here

Elsewhere, the Group of Seven’s chief financial officers hold a virtual meeting and the central banks of Indonesia, Nigeria, Kenya and New Zealand set rates.

Central bank rate decisions this week

Click here to see what happened over the past week and here’s our roundup of what’s happening in the global economy.


In the United States, investors will follow April data on personal spending, durable goods orders and home sales to gauge the strength of the recovery at the start of the second quarter.

Mohamed El-Erian, president of Queens’ College at Cambridge University and Bloomberg Opinion columnist, says concerns are growing in markets that the Fed’s political risk factor may not be as positive for prices actives.

Several Federal Reserve policy makers are also expected to speak, including board member Lael Brainard. She is due to speak at a cryptocurrency conference, which will be in the spotlight after the market wild ride in recent days.


Bank of Japan Governor Haruhiko Kuroda and Board Member Hitoshi Suzuki will provide their latest views on the resumption of the pandemic in speeches on Monday and Wednesday. Tokyo CPI data is due later in the week as Japan continues to see low prices despite the global upturn in inflation.

The Bank of Indonesia meets on Tuesday with no expected change in its monetary parameters. The New Zealand central bank is also expected to keep QE rates and parameters unchanged on Wednesday, with Governor Adrian Orr likely to insist that policy will remain stimulating for an extended period even as the economic outlook improves.

South Korea’s central bank meets on Thursday with price growth above 2% for the first time in two and a half years. The BOK will update its forecast and likely maintain its policy while continuing to monitor continuous improvement of the economy.

Europe, Middle East, Africa

In a week cut short across much of the continent by a public holiday on Monday, the most significant reports due outside of German data range from euro region economic confidence to a final reading of French gross domestic product for the first quarter.

Several central bank officials will speak across Europe, including at a conference on Tuesday at which Riksbank Governor Stefan Ingves and European Central Bank chief economist Philip Lane. Meanwhile, Silvana Tenreyro and Gertjan Vlieghe of the Bank of England‘s Monetary Policy Committee are also expected to deliver speeches.

Hungary will likely keep interest rates unchanged on Tuesday before becoming the first central bank in the eastern European Union to begin monetary tightening next month to tame soaring inflation. On the same day, Czech and Slovak policymakers discuss the pros and cons of adopting the euro.

Nigerian production remains limited by OPEC production cuts

As for Africa, Sunday’s data is likely to show Nigeria’s economic growth remained close to zero in the first quarter after oil production and its purchasing managers index were little changed from the previous three months.

The country’s central bank is expected to keep its key rate unchanged on Tuesday, even with inflation to double the top of its target range as it seeks to stimulate an economic recovery. Meanwhile, monetary authorities in Kenya and Angola are also expected to meet on Wednesday and Friday.

Turkey reports foreign tourist arrivals for April on Monday. Hopes fade for a summer the revival of tourism which would provide essential foreign currencies and support the lira as concerns grow about the decline in central bank reserves.

Latin America

As is the case elsewhere in the world, inflation is once again at the center of concerns in Latin America. Look for Mexico’s bi-weekly reading to show a year-over-year decline, easing some concerns about central bank tightening. Deputy Governor Irene Espinosa has ruled out further easing and said Banxico could raise its policy rate even before the Fed.


Inflation could slow in Mexico while continuing to rise in Brazil

Sources: Instituto Nacional de Estadística y Geografía; Instituto Brasileiro de Geografia e Estatística; Fundação Getulio Vargas; Bloomberg.

In Brazil, forecasts call for the mid-month core inflation index to exceed 7%, well above target, followed by reports on the country’s broadest inflation measure as well as wholesale price.

Mexico releases first quarter output data on Wednesday, with the minutes from the latest central bank meeting scheduled for Thursday’s release.

Unemployment figures in Brazil and Mexico, respectively, may be little changed and still well below pre-pandemic levels.

On the same page

Major Latin American economies now all have negative real interest rates

Sources: national statistical agencies, central banks.

The Colombian central bank will certainly keep its key rate at an all-time high of 1.75% on Friday. With the country’s inflation rate of 1.95% for April, the region’s five major economies are now all posting negative inflation-adjusted interest rates.

– With the help of Peggy Collins, Andrea Dudik, Benjamin Harvey, Robert Jameson and Malcolm Scott