March 9, 2020


BY Teneo

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( 6 mins)

The European Central Bank will unveil its response to the COVID-19 crisis. The Chinese economy is now rapidly returning to normal. Argentina’s aim of wrapping up debt negotiations by the end of March looks even more unrealistic now. Turkey’s president will meet EU leaders in Brussels. Meanwhile, Japan is passing emergency legislation in light of COVID-19, constitutional reform legislation continues to advance in Russia, the presidential reform agenda is in doubt in Brazil, and the oil price crash might motivate a speedier budget review in Nigeria.



The crash in oil prices reflects a decrease in demand due to the COVID-19 outbreak, but also Saudi Arabia’s launch of a price war after Russia decided against cuts to oil production. Our graph shows that countries more dependent on oil also tend to display lower levels of export diversification. More diversified advanced economies, often less dependent on oil, such as West European countries, might benefit in the short run. Ultimately, Saudi Arabia’s decision serves as an example of how governments’ responses to the virus outbreak – sometimes following a geopolitical logic – can affect the global economy.



At the 12 March governing council meeting, all eyes will be on the European Central Bank’s reaction to the COVID-19 crisis. It remains dubious whether the ECB follows its US colleagues and cuts rates. Changes to the TLTRO programs providing liquidity to businesses should be watched, as well as a potential expansion of quantitative easing. Overall, the focus in the Eurozone will remain on monetary policy for now. The German government coalition yesterday agreed on greater support for short-term work schemes and declared its intention to slightly increase investment – but merely by around EUR 12bn over the period 2021-24.


Total Chinese exports plunged 17.2% year-on-year in January and February combined, but imports from the US edged up by 2.5%, according to monthly trade data released on 7 March. Given the economic setback from COVID-19 and despite the modest rise in purchases from the US, China still faces a steep climb to meet annual purchase commitments for 2020 contained in the phase-one trade deal with the US. But the Chinese economy is now rapidly returning to normal, and many of the purchase items in the deal are big-ticket items that can be purchased in bulk.


According to an official timetable, the government is supposed to unveil its debt restructuring offer this week. There were already rumors that the offer could be pushed back to next week even before the wider market volatility resulting from the COVID-19 outbreak and the latest oil market moves, which inject new uncertainty into the restructuring that lies ahead. Certainly, the government’s highly-ambitious aim of wrapping up debt negotiations by the end of March looks even more unrealistic now.


President Tayyip Erdogan is due to hold talks with European Council president Charles Michel and the commission’s Ursula von der Leyen in Brussels today, 9 March. However, a quick breakthrough regarding the ongoing refugee crisis at the Turkish-Greek border is unlikely. Regardless, Erdogan will claim victory at home. At the very least, the fact that both sides remain in conversation for now should be seen as positive.





The Abe cabinet will move quickly to pass emergency legislation to bolster its powers to combat the COVID-19 outbreak. Thanks to cooperation with opposition parties, the legislation will be approved by the cabinet on Tuesday, 10 March and is expected to clear both houses of the Diet by Friday. Meanwhile, on Tuesday, the government will also unveil new economic stimulus measures to help businesses struggling to cope with supply and demand shocks due to the outbreak.




Parliament is unlikely to appoint the government of prime minister-designate Florin Citu (Liberal Party, PNL) in a vote of confidence which should take place in the second part of the week. This will prolong the political crisis for at least two more weeks as President Klaus Iohannis (independent) will have to propose yet another candidate. Under normal circumstances Iohannis would be inclined to nominate another PNL member who would have limited changes of winning parliamentary approval thus paving the way for snap general elections. However, the spread of COVID-19 across Romania may prompt the president to put forward an independent candidate to lead a technocratic government with full-powers.


On 10 March the lower house of parliament (State Duma) is scheduled to start the second reading of the constitutional amendments outlined by President Vladimir Putin in his January address. This should reveal the final list of proposed changes, which would still face the third (and final) reading in the State Duma and need approval from the upper chamber of parliament (Federation Council), before being sent to the president for his signature. The referendum on these amendments is scheduled on 22 April but the poll may be postponed to prevent a greater outbreak of COVID-19.




It is unclear how the Bolsonaro government will react this week in the presence of heightened fears of a global recession and the looming oil price war. It is no longer clear whether the government will follow suit and send three draft bills to Congress that would end the crisis over distribution of budget funds, or whether the president will opt for continuing “hostilities” with other branches of government as a means to divert attention from the worse-than-expected state of the economy. The future of the reform agenda should become clearer after this week.




Calls for a speedy review of the 2020 budget will gather pace in the wake of the oil price crash. Just last week, Finance Minister Zainab Ahmed had announced a mid-term budget review to assess the impact of COVID-19 on the government’s spending targets and revenue situation. The budget is based on an average benchmark oil price of USD 57; however, crude has traded below that for most of February. The oil price crash following the failure of OPEC+ members to agree on production cuts beyond March will reinforce the urgency of a review. Nevertheless, in recent years, implementation of the budget has always deviated hugely from the approved budget plans. Regardless of the timing of a review – which would be a first for Nigeria – plans for capital expenditure are set to take a massive hit.

South Africa

On Friday, Moody’s cut its 2020 growth forecast for South Africa to 0.4%, from 0.7% amid the global COVID-19 outbreak. The fallout from the global COVID-19 outbreak will only sharpen the National Treasury’s fiscal dilemmas and weaken South Africa’s odds of holding on to its final investment-grade credit rating, which is due from Moody’s on 27 March. Within its borders, South Africa has thus far confirmed seven COVID-19 cases.

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