Union Bancaire Privée (UBP) is one of the leading private banks in Switzerland. Specialized in asset management for institutional and individual investors, as of June 30, it managed assets worth 134.4 billion Swiss francs (about 123.6 billion euros). Patrice Gautry has worked at this Geneva-based entity since 2000 and is currently its chief economist.
Will the long-awaited recovery come in 2021? We are optimistic because there will be different levels of support for that recovery to take place.. Our forecast is for the world economy to grow 5% this year and with the vaccination process underway it is likely that we will approach 6%.
Europe must be one of the most favored regions, especially peripheral countries such as Spain and Italy, since in 2020 it was one of the hardest hit by the pandemic. In addition, Europe will have the community fund for recovery and, in parallel, fiscal and monetary support will be maintained.
I believe that Western countries will lead the recovery process, although China can grow up to 9%. Some Asian manufacturing countries such as India, Indonesia, the Philippines or Ceylon should also benefit from the return to normalcy.
Do you think activity levels prior to the coronavirus crisis will recover soon? With the help of the vaccine, the answer is yes. In China we are already in that situation , in the United States I believe that in the fourth quarter of this year the level of activity that was at the end of 2019 will recover and, in the case of Europe, our forecast is that this will happen in the middle of 2022.
Without the help of the vaccine, returning to the pre-covid-19 situation would have taken between a year and two more years.
This recovery scenario that you draw, I imagine that it will be threatened by different risks. What factors could derail the improvement?
The first risk is the health one. After the big rebound in the third quarter of 2020, the second wave of the pandemic has taken its toll. Most economies, perhaps with the exception of the United States, will see their GDP fall in the last quarter of the year. In addition, we are entering what could be a third wave.
Therefore, the growth scenario will depend on the ability of the rulers to control the pandemic.and manage the vaccination process successfully. In addition, it must be verified that the treatment is indeed successful, the duration of the immunity and its effectiveness against new mutations of the virus. In the most optimistic scenario, we would have herd compensation by the end of 2021.
The other risk is linked to economic policies, especially if budget stimuli are withdrawn too soon. Any debate about a return to fiscal austerity should be postponed to 2023 or 2024, not before.
Along with fiscal measures, the other dam that has contributed to the recession not being even more serious is the response of the central banks. Some think that monetary stimuli have already reached their limit. Do you share it?
It is likely. If the recovery scenario is fulfilled, the central banks will not have to go further in the stimuli and it will be enough for them to maintain those already announced. However, if the situation becomes complicated, they will be forced to lower negative rates even further.
In the case of the ECB, in an environment of weakness, it would have to consider whether to include in the list of assets susceptible to purchase high yield debt and bank bonds, something to which it has so far refused.
On the other hand, if the vaccination is a success, we will see how in the United States the forecast begins to grow for the Federal Reserve to design an exit plan from the stimuli with a view to putting it in place by the end of 2022.