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FERI Economics Update February 2020 - Corona Virus: No Serious Consequences for the Global Economy in Sight for the time being

Bad Homburg, 02/03/2020
from Axel D. Angermann, FERI AG
  • Epidemic dampens Chinese GDP growth in first quarter
  • Slight recovery of the global economy nevertheless possible
  • Phase 1 agreement between USA and China with limited effect

The spread of the corona virus is also slowing down economic growth in China. It is already foreseeable that GDP growth in the first quarter of 2020 will slip well below the 6% mark due to the epidemic. Nevertheless, the overall negative effect is limited. On the one hand, production in large parts of the country is at a standstill for the Chinese New Year anyway, and losses in the stationary retail trade can - unlike in 2003 with the SARS virus - be at least partially compensated for by online purchases. Experience with the SARS epidemic has also shown that once an epidemic has subsided, there is a catch-up effect, which allows the growth rate to rise again significantly in the following quarter. Even in a negative scenario of a prolonged epidemic, it is safe to assume that the Chinese leadership will counteract the situation with measures to support the economy.

Even before the outbreak of the corona epidemic, China's growth momentum was expected to fall below the 6% mark in the course of 2020. A fundamental reassessment of the situation therefore does not appear necessary for the time being. The risk of a significant collapse of the Chinese economy with noticeable negative effects on the global economy remains limited. However, there is also a very small chance that China will provide noticeable positive impetus to the global economy in the current year. We therefore continue to assume that there will be a temporary and moderate recovery of the global economy, but still do not expect a strong new upswing that will last for a long time.

Partial Agreement Provides Breathing Space

With the signing of the Phase 1 agreement between the USA and China on January 15th, an important prerequisite for a moderately better global economic development in the current year was fulfilled. In fact, the industrial downturn, especially in Europe, could soon be over. The sentiment indicators and an improved order situation point in this direction. Nevertheless, the positive effects of the "ceasefire" in trade wars should not be overestimated. The agreement does not offer a solution to the fundamental conflicts between the USA and China, especially the unequal treatment of Chinese companies and foreign investors in the Chinese market. Although the partial agreement gives the Chinese economy a breathing space and reduces the risk of further tariff increases, it does not fundamentally change the trend of declining growth rates in China.

China's expansive monetary and fiscal policy over the past year prevented a more severe slump in growth momentum. The fact that the central bank again lowered the minimum reserve rate and the loan prime rate at the end of the year is a clear sign that the Chinese leadership continues to view the economic situation critically despite the stabilisation in the fourth quarter and considers additional monetary policy stimuli to be necessary.


About Axel D. Angermann

As Chief Economist of the FERI Group, Axel D. Angermann analyses the economic and structural developments of all markets that are important for asset allocation. This data forms the basis for the strategic orientation of FERI's asset investments.

Angermann has been responsible for the analyses and forecasts prepared by FERI for the overall economy and individual sectors since 2008. He joined the company in 2002 as an industry analyst. His professional career began at the Max Planck Institute for Economics and the German Chemical Industry Association. Angermann studied economics in Berlin and Bayreuth.


About FERI AG

Founded in 1987 and headquartered in Bad Homburg, Germany, the FERI Group has developed into one of the leading investment houses in the German-speaking area. FERI offers tailor-made solutions for institutional investors, family assets and trusts in the following areas:

•    Investment Research: macroeconomic forecasts and asset allocation analyses
•    Investment Management: institutional asset management and private wealth management
•    Investment Consulting: advisory services for institutional investors and family offices

The FERI Cognitive Finance Institute was formed in 2016. It is the strategic research centre and creative think tank of the FERI Group. The Institute focuses on innovative analyses and the development of methods for long-term oriented economic and capital market research. 

FERI and MLP currently have assets of EUR 38.1 billion under management. A total of EUR 8.5 billion of these assets are alternative investments. The FERI Group is headquartered in Bad Homburg and has offices in Dusseldorf, Hamburg, Luxembourg, Munich, Vienna and Zurich.



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Member of the Management Board
Corporate Strategy, Marketing and Communications

T +49 (0) 6172 916-3192
F +49 (0) 6172 916-1192
presse@feri.de

FERI AG
Rathausplatz 8-10
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Katja Liese
Member of the Management Board
Corporate Strategy, Marketing and Communications

T +49 (0) 6172 916-3192
F +49 (0) 6172 916-1192
presse@feri.de

FERI AG
Rathausplatz 8-10
D-61348 Bad Homburg

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