With lockdowns starting to be relaxed, the worst in macro is likely behind us. We still expect that this will be the steepest but shortest recession of our lifetime, albeit with a slow, protracted and uneven recovery. We foresee a capacity shortfall of 5-10% compared to the pre-COVID normal under the baseline in the major markets until a vaccine is widely available. Further structural issues such as a debt overhang and bankruptcies will likely continue to linger for some time.
Our forecasts this month are largely unchanged, except for a downgrade to 2020 growth in China.
"Old themes" are resurfacing, such as the US-China trade war, tensions between Hong Kong and China, and a no-trade-deal Brexit.
The proposed EU recovery fund is a crucial positive step in the right direction for fiscal cooperation in Europe.
Significant new German fiscal stimulus will further support the recovery.
Downside risks have been revised lower, but still dominate potential for upside surprises on the macro front.