Economists see recession in 2020-21, trade-war uncertainty amplifies global slowdown

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Economists see recession in 2020 or 2021, trade-war uncertainty amplifies global slowdown, EU objects PM Johnson’s letter

Against the dollar, Thai baht on the previous trading day, on a sideways trend, closed at 30.82.

72% of economists saw a recession in 2020 or 2021, referring to US National Association for Business Economics (NABE)’s survey released on 19 August. This was slightly up from 67% in February 2019. However, the February and August surveys overall do not provide dissimilar results as affirming that most economists projected an economic meltdown by 2021.

Trade-war uncertainty could reduce the global economy by 0.6% in 2021, or USD 585 billion out of IMF’s estimated world GDP of USD 97 trillion, according to Bloomberg. And, that is double the tariff-baseline impact on the global economic expansion of 0.3%. However, US secretary of state Pompeo believed that the US-China trade dispute could conclude by the 2020 presidential election.

Although reportedly that President Trump was considering payroll tax cuts despite claiming that the economy was far from a recession, the White House then stated to dismiss the idea.

President Trump was back to threaten the EU on auto tariffs again. He insisted that the US needed to impose taxes on cars imported from the EU, subsequent to the US-EU agreement to expand beef exports from the US to the EU. Beforehand, the US decided to postpone auto tariff imposition on the EU and Japan for six months, from mid-May to November.

The European Council (EU Council) refused PM Johnson’s letter proposing to abandon the Irish backstop but to establish alternative arrangements to ascertain no hard Irish border. The EU Council stated that the letter does not offer a lawful functional resolution and a guarantee of such arrangements to be put in place during Brexit’s transitional period.

PBoC’s first quotation of China’s loan prime rate (LPR), after reformed to be more market mechanized, was 4.25%, lower from 4.35% previously, as to help boost the sluggish economy.

Thailand’s cabinet endorsed the fiscal stimulus package worth THB 316 billion (about USD 10.2 billion), aimed at enhancing the country's economic growth by 0.5-0.6 % this year. In spite of its non-sustainability, it could possibly augment the economy and public confidence at least in the short run.

Moving around 30.78-30.84 this morning, USDTHB could be between 30.76-30.86 today.


Germany offers 30-year zero-coupon bonds

Thai benchmark government bond yield (LB28DA, 9.3 years) on the previous trading day was 1.52%, +3.54 bps. Meantime, the latest closed Thai and US 10-year bond yields were 1.54%, +3.17 bps, and 1.55%, -5 bps, respectively.

After rebounding on recession fears eased thanks to German and Chinese potential economic stimulation, US treasury yields ticked lower.

Germany, for the first time, would be offering 30-year zero-coupon bonds today. Two weeks ago, German government bond yield curve entirely fell into negative territory, and 30-year market and auctioned yields kept declining over time. The market yield at the moment is about -0.17%, while the latest auctioned yield was 0.3% at the July auction.

On yield spreads between long- and short-dated bonds, US 10-year-3-month spread inversion has been existing for 68 days in 2019. 10-year: 1.55% v 3-month: 1.94%, spread: -39 bps; while, US 10-year-2-year treasury spread: +5 bps. Thai 10-year-2-year government yield spread was 10 bps.

Thai benchmark government bond yield (LB28DA, 9.3 years) could be between 1.51-1.53% today.


Sources: Bangkokbiznews, BBC, Bloomberg, CNBC, CNN, Financial Times, ING,, Reuters, South China Morning Post