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Spike in "foreign exchange" google search after COVID

Policy Pulse - George Anjaparidze - 9 April 2020

On April 6, the IMF indicated that COVID-19 will cause more economic damage than the global financial crisis. The IMF now expects the world to dip into recession in 2020. The WTO forecasts the trade slump in 2020 to exceed declines observed during the global financial crisis. Search trends on google support these assertions.

Google trends data[1] from March 2020 shows that COVID-19 has led to the highest ever search rate for terms on the “foreign exchange” topic, which points to rising exchange rate pressures and volatility (see chart: Global). This data supports the assertion that we are likely to have experienced the most sudden withdrawal of capital from emerging markets in recent history.

Had central banks across emerging economies, including Brazil, India, Indonesia and South Africa not intervened to prop-up local currencies, we would likely have seen much higher numbers of google searches on the foreign exchange topic.

All five of the Eurasian Economic Union members (Belarus, Kazakhstan, Kyrgyzstan, Russia and Armenia) made the list of top ten countries with the highest rate of google searches on the topic of foreign exchange. Other countries that are also on this list include: Tajikistan, Ukraine, Moldova, Uzbekistan and United Arab Emirates.

See our related analysis: Volatility in Eurasian Union revealed by google trends

Download PDF: Spike in "foreign exchange" google search after COVID

[1] Google trends data reveals frequency of terms searched under the “foreign exchange” topic. The data is aggregated across various parameters using an index. The numbers on the index represent search frequency relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term is half as popular. The ranking of countries is assessed based on the relative share of queries that fall within the foreign exchange topic. The rankings do not take into account absolute query count. So, a tiny country where 80% of the queries are related to “foreign exchange” will get twice the score of a giant country where only 40% of the queries are related to “foreign exchange”.

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#Google #Googletrends #FX #ForeignExchange #COVID #Coronavirus #Economy

George Anjaparidze

Russian economy: COVID19 stress test

Policy Pulse - George Anjaparidze - 3 April 2020

Oil prices have plummeted by 72% in 2020 and have reached their lowest level in nearly two decades. Demand has been hit by the economic impacts of the coronavirus. At the same time, oil supply has surged. OPEC countries together with Russia and other oil exporters were not able to agree on additional cuts and have instead increased supply. The lower oil price has brought the Russian ruble tumbling, it is down 29% against the US dollar since the start of the year.

The impacts of COVID-19 on the Russian economy are likely to be significant and will continue to place a strain on public finances. In our central stress test scenario, we expect that a combination of a fall in revenues and need for higher government spending, will result in an annual funding gap of about $120 billion. We assume that oil and gas revenues will mirror the 72% fall seen in the oil price, which will lower total revenues by about 28% (based on preliminary 2019 data, aggregate oil and gas revenues made up about 39% of the federal budget). In addition, our scenario assumes that other government revenues fall by 20% and government spending increases by $17.8 billion (as announced yesterday).

The hard currency resources available in the National Wealth Fund as of 1 March 2020 would be able to finance this shortfall for approximately 12 months. If the impacts on COVID-19 linger beyond this time period, the Russian leadership may be left with little choice but to raid the foreign exchange reserves of the Russian Central Bank, which stood at a staggering $570 billion. Such an extreme move would undermine the independence of the Russian Central Bank. However, it would extend the ability of the Russian government to fill the COVID-19 funding gap for an additional 4 to 5 years.

The strategic implication of this analysis is that Russia is likely to remain in a position of relative economic strength during the COVID-19 pandemic. Despite being dependent on hydrocarbon resources, its vast foreign currency reserves give it sufficient buffers to manage the volatility arising from the COVID-19 crisis in the short and medium term.

Other countries in Eastern Europe and Central Asia, without significant financial reserves, particularly those dependent on remittance flows and tourism, may be more exposed to the impending volatility. This means the international community, working in concert with the IMF, World Bank and other international financial institutions, needs to prepare robust support packages that will give these countries the necessary resources to manage the expected volatility. Veritas Global is in the process of examining vulnerabilities and identifying potential policy solutions.

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#COVID19 #coronavirus #Economicimpact #Russia #Economy #oil #oilandgas

George Anjaparidze

Forecast vs. Actual: air cargo in 2019 and 2020

Policy Pulse - George Anjaparidze - 10 February 2020

We got 3 out of 4 predictions right for air cargo performance in 2019 (see table). While not perfect, it is far better than established industry forecasters.

Table: Air cargo 2019 forecast vs. actual

Source: Forecast performance is based on Veritas Global forecast, actual performance is based on IATA reporting of year end data and IHS Markit high frequency indicators.

For 2020, we expect air cargo traffic performance to grow by about 3% to 4%

On the macroeconomic front we expect to see positive lagged effects in 2020 from monetary policy easing we saw in 2019. High frequency indicators show the global economy continued to accelerate in January 2020 for the third straight month. However, trade performance has struggled to recover. Overall trade tensions are easing but trade relationships have not normalized and are unlikely to in the foreseeable future. Decisions by some central banks to pursue less loose monetary policy in early 2020, if further tightened, add downside risks to our forecast.

One-off factors and policy risks also influence our outlook. The coronavirus outbreaks have disrupted supply chains and on-net we expect this to have a favorable impact on air cargo demand. However, the sector faces unprecedented level of policy risks.

Policy issues in 2020 will have a major impact on air cargo demand this year as well as the more distant future. In addition to trade tensions, negotiations at the WTO will specifically impact air cargo performance, including negotiations on whether to extend the customs duties moratorium on international e-commerce, compliance with tariff policies of the Information Technology Agreement and implementation of the Trade Facilitation Agreement. Negative outcomes of these negotiations add downside risks to our forecast.

Furthermore, growing consumer awareness on climate change will chip away at demand, especially if industry is unable to improve perceptions and sustainability credentials of the air cargo product.

#aviation #trade #outlook #aircargo #ecommerce #WTO #sustainability #climatechange #risks #logistics #economy #economics #coronavirus