the road to redemption - standard chartered · 2020. 12. 18. · ghana – long road to debt...

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Important disclosures and analyst certifications can be found in the Disclosures Appendix All rights reserved. Standard Chartered Bank 2020 https://research.sc.com

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Global Focus – Economic Outlook 2021

The road to redemption

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Standard Chartered Global Research | 3 December 2020 2

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Table of contents

Global overview 3

The road to redemption 4

Global charts 14

Key elections to watch in 2021 17

Geopolitical economics 18

2021 geopolitics – Same same, but different 19

Economies – Asia 23

Asia – Top charts 24

Asia – Macro trackers 25

Australia – A better tomorrow 27

Bangladesh – Navigating turbulence 29

China – Steering clear of a policy cliff 31

Hong Kong – A low recovery ceiling 33

India – Slow-motion recovery 35

Economic outlook – Gradual and uneven improvement 35

Indonesia – Turning around 37

Japan – Clean slate 39

Malaysia – Watch the labour market 41

Myanmar – The next five years 43

Nepal – Low growth expected, for now 44

New Zealand – Not going negative 45

Philippines – Rebuilding the economy 47

Singapore – Slow, uneven, bumpy 49

South Korea – A new normal 51

Sri Lanka – Between a rock and a hard place 53

Taiwan – Relying on global (and tech) rebound 55

Thailand – A muted recovery 57

Vietnam – Strong recovery expected 59

Economies – Middle East, North Africa

and Pakistan 61

MENAP – Recession, reform and debt 62

Bahrain – Build-up of risks 64

Egypt – Keep calm and carry on 65

Iraq – Fragility in rigidity 66

Jordan – Deficits, debt, disbursements 67

Kuwait – Liquidity challenges to ease 68

Lebanon – Deep scarring 69

Oman – Reform momentum to accelerate 70

Pakistan – Navigating turbulence 71

Qatar – This too shall pass 72

Saudi Arabia – Looking inwards 73

Turkey – Not out of the woods 74

UAE – In search of growth drivers 75

Economies – Africa 76

SSA in 2021 – Building back (with higher debt) 77

Africa – Top charts 81

Angola – Year of reckoning 82

Botswana – Funding needs at the fore 84

Cameroon – Exiting recession 86

Côte d’Ivoire – Return to a robust growth path 87

Ethiopia – A year of diplomacy 89

Gabon – A partial recovery 90

The Gambia – The election test 91

Ghana – Long road to debt stabilisation 92

Kenya – Looking to the IMF 94

Mauritius – Things can only get better 96

Mozambique – Towards LNG production 97

Namibia – Fiscal risks back in focus 98

Nigeria – Tough times spur initial reforms 99

Senegal – Getting back on track 101

Sierra Leone – Recovery mode 102

South Africa – Turning a corner in 2021 103

Tanzania – A second term for Magufuli 105

Uganda – A pivotal year 106

Zambia – The distressed debt club 107

Zimbabwe – Confidence is key 108

Economies – Europe 109

Europe – Top charts 110

Euro area – Turning the corner 111

Switzerland – Outperforming its neighbours 113

UK – Entering the post-Brexit world 115

Czech Republic – Battling the second wave 117

Hungary – Recovery falters 119

Poland – Soaring infection rates 121

Russia – Running out of steam 123

Economies – Americas 125

US – Top charts 126

Latin America – Top charts 127

US – Staying divided 128

Canada – Waiting for better times 130

Brazil – Cross-currents 131

Chile – The right stuff 133

Colombia – Struggling to keep up 134

Mexico – Better than advertised 135

Strategy outlook 137

Here comes the sun 138

Forecasts and reference tables 144

Forecasts – Economies 145

Forecasts – FX 146

Forecasts – GDP 147

Forecasts – Rates 148

Forecasts – Commodities 149

Forecasts – Selected interbank rates by tenor 150

Authors 151

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Global overview



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The road to redemption

Hopes pinned on vaccines

The COVID shock has been unprecedented in modern times. In addition to the impact

on lives, the economic damage will last for years to come. Governments and

corporates alike have suffered profound damage to their balance sheets; repairing

them is likely to be a multi-year process. The economic shock in 2020 could have been

much more severe without the quick and dramatic response from central banks and

governments globally (Figure 1). Having learned the lessons of the GFC, policy makers

moved swiftly to limit the downside to their economies.

As we enter the last few weeks of the year, we shift our focus to 2021. Recent news

on successful trials of vaccines from multiple companies has provided a much-needed

boost to sentiment heading into the new year. We expect vaccines to receive regulatory

approval in the coming weeks, with rollout starting in early 2021. The positive growth

impact is unlikely to be fully felt until H2-2021, however. Given capacity constraints and

logistical issues, distribution is likely to be uneven across countries. That said, we

expect a sizeable share of the population in the US and Europe – the hardest-hit

regions – to have access to vaccines by Q3.

Vaccine rollout will allow for the resumption of travel and tourism, supporting the

economic recovery. We expect global GDP growth to bounce back to 4.8% in 2021

from a 3.8% contraction in 2020 (Figure 3). While our 4.8% growth forecast is well

above global average growth over the past 10 years (3.7%), the expected recovery

next year will not fully close the output gap created by the COVID crisis. Given their

particularly deep recessions in 2020, the euro area and India are unlikely to return to

2019 GDP levels until 2022.

We expect the recovery to strengthen in H2-2021 as investment picks up. Earlier in the

year, particularly in Q1, lockdowns and social-distancing measures are likely to

continue to constrain activity. As of early December, the US and parts of Europe were

still seeing elevated case counts (Figure 2); the economic impact of this is likely to be

felt in early 2021.

Kaushik Rudra +65 6596 8260

[email protected]

Global Head, Fixed Income Research & Head, Asia Research

Standard Chartered Bank (Singapore) Limited

Chidu Narayanan +65 6596 7004

[email protected]

Economist, Asia

Standard Chartered Bank (Singapore) Limited

Given capacity constraints and

logistical challenges, vaccine

availability is likely to be uneven

We expect global growth to rebound

to 4.8% in 2021, following a 3.8%

contraction in 2020

We expect the recovery to gain

momentum in H2

Hopes pinned on vaccines

The COVID shock has been unprecedented in modern times. In addition to the impact on lives, the economic damage will last for

years to come. Governments and corporates alike have suffered profound damage to their balance sheets; repairing them is likely

to be a multi-year process. The economic shock in 2020 could have been much more severe without the quick and dramatic

response from central banks and governments globally. Having learned the lessons of the GFC, policy makers moved swiftly to

limit the downside to their economies.

As we enter the last few weeks of the year, we shift our focus to 2021. Recent news on successful trials of vaccines from multiple

companies has provided a much-needed boost to sentiment heading into the new year. We expect vaccines to receive regulatory

approval in the coming weeks, with rollout starting in early 2021. The positive growth impact is unlikely to be fully felt until H2-

2021, however. Given capacity constraints and logistical issues, distribution is likely to be uneven across countries. That said, we

expect a sizeable share of the population in the US and Europe – the hardest-hit regions – to have access to vaccines by Q3.

Vaccine rollout will allow for the resumption of travel and tourism, supporting the economic recovery. We expect global GDP

growth to bounce back to 4.8% in 2021 from a 3.8% contraction in 2020. While our 4.8% growth forecast is well above global

average growth over the past 10 years (3.7%), the expected recovery next year will not fully close the output gap created by the

COVID crisis. Given their particularly deep recessions in 2020, the euro area and India are unlikely to return to 2019 GDP levels

until 2022.

We expect the recovery to strengthen in H2-2021 as investment picks up. Earlier in the year, particularly in Q1, lockdowns and

social-distancing measures are likely to continue to constrain activity. As of early December, the US and parts of Europe were still

seeing elevated case counts; the economic impact of this is likely to be felt in early 2021.

Figure 1: Balance sheets to continue expanding

G3 balance-sheet size, % of GDP

Figure 2: Europe, Americas continue to see elevated

COVID-19 case counts

7-day moving average of confirmed cases

Source: Fed, ECB, BoJ, Bloomberg, Standard Chartered Research Regions as defined by WHO; Source: WHO, Standard Chartered Research

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Figure 3: Growth is likely to rebound in 2021 as economies open up

GDP growth, actual (2019) and our forecasts

2019 2020 2021 2022

World 2.9 -3.8 4.8 4.0

Majors 1.6 -5.8 3.1 3.4

US^ 2.2 -3.7 2.1 3.8

EU 1.3 -7.7 4.0 3.7

Japan 0.7 -5.5 3.0 1.5

UK 1.4 -11.0 5.5 3.5

Canada 1.7 -5.8 4.0 3.0

Australia 1.9 -3.2 2.6 2.8

New Zealand 2.3 -4.8 4.2 3.9

Switzerland 1.0 -5.5 3.6 2.4

Asia 5.1 -1.3 7.5 5.1

Bangladesh* 8.2 2.0 5.6 7.5

China 6.1 2.1 8.0 5.6

Hong Kong -1.2 -5.8 4.0 2.5

India** 4.2 -8.0 10.0 5.0

Indonesia 5.0 -1.7 6.0 5.0

Malaysia 4.3 -5.8 7.5 5.5

Philippines 6.0 -8.9 6.1 6.5

Singapore 0.7 -6.0 5.2 4.4

South Korea 2.0 -1.0 2.9 2.4

Sri Lanka 2.5 -3.0 3.8 4.2

Taiwan 2.7 1.8 3.3 2.0

Thailand 2.4 -6.7 3.1 2.5

Vietnam 7.0 3.0 7.8 6.7

MENAP 1.8 -2.9 2.0 3.6

Bahrain 1.5 -4.0 1.8 2.5

Egypt* 5.6 3.6 2.0 5.5

Jordan 2.0 -4.4 2.3 1.5

Kuwait 0.7 -6.3 2.5 3.4

Lebanon -1.0 -25.0 -10.0 -5.0

Oman 2.3 -5.0 0.0 2.6

Qatar -0.4 -3.5 2.1 3.3

Saudi Arabia 0.3 -5.0 1.9 2.7

UAE 2.7 -4.6 1.9 2.5

Iraq 4.0 -12.0 1.7 3.6

Pakistan* 3.3 -0.4 0.0 4.0

Turkey 0.3 -2.0 3.5 3.5

Africa 2.5 -3.7 3.6 3.5

Angola -1.0 -4.3 1.2 0.8

Botswana 3.8 -10.0 8.8 5.6

Cameroon 4.2 -0.4 3.6 4.6

Gambia 6.0 -2.1 6.0 5.9

Ghana 5.8 1.5 4.2 5.0

Côte d’Ivoire 7.0 1.9 6.7 6.5

Kenya 5.7 1.5 4.7 5.5

Nigeria 2.3 -4.3 2.5 3.1

Sierra Leone 5.1 -2.7 4.0 4.5

South Africa 0.2 -8.0 4.5 2.0

Tanzania 6.6 3.2 4.9 6.0

Uganda 5.8 -0.3 4.0 6.0

Zambia 2.0 -4.2 2.0 3.0

Zimbabwe -6.0 -10.0 -0.5 0.8

Latin America 0.7 -6.5 3.9 2.5

Argentina -1.0 -6.8 1.9 2.5

Brazil 1.0 -4.6 3.7 2.5

Chile 1.6 -5.1 5.6 2.6

Colombia 3.0 -7.6 4.1 3.3

Mexico -0.1 -8.7 4.7 2.2

Peru 2.0 -7.1 3.6 3.3

Emerging Europe 2.1 -4.5 3.4 2.8

Czech Republic 2.5 -6.5 4.2 3.2

Hungary 4.8 -5.0 4.0 4.0

Poland 4.2 -3.8 3.5 3.2

Russia 1.2 -4.5 3.2 2.5

* Bangladesh, Pakistan, and Egypt: Figures are for fiscal year ending in June of year shown in column heading ** India: Figures are for fiscal year starting in April of year shown in column heading

^ Inflation: Core PCE deflator used for US; Source: Standard Chartered Research




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While the US, the euro area and Japan are likely to recover next year, we expect

Asia – particularly China and India – to lead the global economic rebound. China is

likely to continue its strong recovery (we forecast 8.0% growth in 2021), having

already exceeded end-2019 GDP levels in 2020. Among Asian economies, India has

faced the sharpest negative shock, with an expected GDP contraction of around

8.0% in FY21 (year ending in March 2021); the expected pick-up in FY22 is largely

due to the base effect. We also expect growth in Sub-Saharan Africa (3.6%), MENAP

(2.0%) and Latin America (3.9%) to pick up in 2021; MENAP and SSA experienced

less severe growth shocks this year, so their recovery is likely to be muted. In Latam,

we expect a healthy pick-up following a fairly sharp decline in 2020 and a few years

of soft growth prior to that.

We expect global growth to normalise to 4.0% in 2022. This is roughly in line with the

average c.3.7% growth rate of the past 10 years, and is an improvement from 2019

(2.9%); heading into this year, we had expected sub-par global growth (3.3%) even

before COVID. So while growth is expected to improve further in 2022, this will still be

largely a function of closing the output gap from 2020. Central banks around the world

are likely to maintain an accommodative policy stance until growth recovers on a more

sustained basis.

Our growth outlook assumes that vaccines will be rolled out from early 2021 and reach

large parts of the population by Q3-2021. It also assumes that major central banks will

maintain their accommodative stance, continuing to support the growth recovery.

Furthermore, we assume inflation will not be a major concern for policy makers in 2021.

That said, supply-side inflation is a potential risk – supply-chain disruptions and

logistics bottlenecks could cause raw-material and transportation prices to rise,

potentially complicating the policy path for central banks. The sizeable policy response

in 2020 has also left the policy cupboard relatively bare going into 2021; this would

leave policy makers with less room for manoeuvre in case of another shock.

Figure 4: Several major economies have vaccine arrangements with pharmaceutical companies

Current vaccine arrangements for selected major economies (mn doses)

See Figure 10 in Global charts for more details; Source: Launch and Scale Speedometer; publicly available sources; Standard Chartered Research

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G42 Healthcare China-lead vaccines Options for additional orders

Asia will lead the charge, with

growth projected at c.7.5% in 2021;

we expect China and India to grow

8% and 10%, respectively

Our growth outlook assumes that

vaccines will be rolled out from

early 2021 and available to large

parts of the population by H2-2021




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Vaccines will be a game changer

The expected rollout of highly effective vaccines is good news for the global economy,

and should signal the beginning of the end of this crisis. That said, given capacity

constraints and logistical issues surrounding the rollout of vaccines, their distribution –

and benefits – are unlikely to be uniform. Countries that already have agreements in

place with vaccine manufacturers are likely to be positioned to recover sooner

(Figure 4). In contrast, some EM countries are likely to be further down the vaccine

distribution chain; while public-private partnerships should help some of them receive

affordable vaccines as quickly as possible, distribution is still likely to be delayed. This

may require social-distancing measures to stay in place for longer, slowing the pace

of economic recovery (see Figure 5 and Vol-inducing vaccine?).

Vaccines to the rescue in the US and Europe

The benefits of vaccine rollout may be particularly impactful in Europe and the

Americas, where COVID-19 fatalities have been among the world’s highest in both

absolute and per-capita terms (Figure 6). While the services-driven nature of these

economies has increased the severity of their pandemic-driven recessions, it also

points to significant economic upside once social-distancing restrictions are lifted.

Figure 5: Transit utilisation has been a good indicator of economic activity

Declines in transit usage and GDP growth (vs full-year-2019); 1 = Q1-2020, 2 = Q2-2020

Please refer to ‘High frequency data suggests bumpy recovery’ for a detailed discussion; Source: Google mobility reports, Standard Chartered Research

Figure 6: Europe and the Americas lead in terms of COVID cases and deaths

Total confirmed COVID-19 deaths per million people

Source: Our World in Data, Johns Hopkins University, Standard Chartered Bank

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Deaths per million Cases per million (RHS)

The pace of rollout will vary

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The majority of people in Europe

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late Q3-2021

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Positive sentiment around vaccines has already boosted equity and commodity

markets, although the impact on the real economy may be felt with a lag given

production, logistical, epidemiological and social hurdles. We expect the majority of

people in Europe and the US to be vaccinated by late Q3-2021, delaying the post-

pandemic recovery until H2.

Vaccine breakthrough is crucial for India

Recent news on the AstraZeneca-Oxford vaccine is positive for India, which has an

agreement with the manufacturer on testing and production. Local production will

provide an estimated c.40mn doses by end-2020 for emergency use once government

approval is received, and another c.300-400mn doses are expected by July 2021,

according to the Serum Institute of India. The vaccine is well suited to India given its

affordability and much simpler storage requirements than some other vaccines. The

government aims to vaccinate close to 250mn people by Q3-2021. Success will

depend critically on the government’s capacity to distribute the vaccine once it is

available. Widespread vaccine distribution will be crucial to the outlook for India, a high-

population country where COVID cases remain elevated.

The COVAX facility – An interim solution for large parts of EM

For many countries, access to vaccines that are effective, affordable and promptly

available will be a challenge. COVAX – a public-private partnership co-led by WHO that

aims to develop and distribute vaccines to lower- and middle-income countries globally

– is a potential solution. This is an equitable scheme in which countries can request

participation; the scheme will provide vaccine coverage for 10-50% of their populations,

and no country will receive vaccines for over 20% of their population until all participating

countries have been offered that amount. Nine vaccines are currently in development

under the COVAX programme, and another nine are under evaluation. While the scheme

is underfunded and cannot fully meet the vaccine needs of EM countries, it represents a

potential way forward while other solutions are found.

Need for targeted policy response to continue

Strong policy response has aided the recovery in US and Europe

Substantial fiscal and monetary support in the US and euro area has underpinned the

recovery since mid-2020, contributing to a strong global trade rebound. We expect

trade to benefit further as vaccination programmes are rolled out, and as US and

European households deploy the large savings they have built up over the past nine

months. US and European leaders also plan government-led reconstruction spending,

though political hurdles could delay or limit the deployment of post-pandemic recovery

funds. This is a particular threat in the US if the White House has to work alongside a

divided Congress, while the EU recovery fund is being held up over a ‘rule of law’

dispute with Hungary and Poland. The Fed and the ECB are prepared to keep rates at

zero (or lower) for a prolonged period, anticipating that substantial spare capacity will

push the balance of risks towards ‘lowflation’ rather than inflation. (The US is unlikely

to return to pre-COVID GDP levels until end-2021; the euro area until end-2022.)

China’s authorities will look for a policy exit

We expect China’s GDP growth to accelerate to 8.0% in 2021 from 2.1% in 2020,

benefiting from a low base. Economic activity should normalise further next year,

supported by the lagged effect of policy stimulus and optimism about coronavirus

vaccines; that said, the expected exit from accommodative policy is likely to weigh on

activity in H2. We foresee a downtrend in q/q growth throughout 2021, although y/y

The development of the

AstraZeneca-Oxford vaccine is a

crucial breakthrough for India

Balance of risks points to

‘lowflation’ rather than inflation; this

should keep the Fed and ECB

pursuing accommodative policies

for an extended period

COVAX could be an interim solution

for many lower- to middle-income

countries

China’s GDP should continue to

recover in 2021, but inflation is

unlikely to be a concern in the

coming months




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growth may surge to 18% in Q1 due to the deep contraction early in 2020. Meanwhile,

plummeting pork prices are likely to drag CPI into mild deflation in the coming months.

We recently lowered our 2021 inflation forecast to 0.9% (from 2.5%), but we predict a

gradual uptrend after Q1 as pork prices stabilise, oil prices rise and core CPI reverts

to pre-COVID levels.

With the recovery on a firm footing, the authorities are preparing for a policy exit.

Regulators have expressed increasing concern about the fallout from emergency

measures introduced in early 2020 to keep businesses afloat, including a debt

moratorium and easy credit access for SMEs. China’s debt-to-GDP ratio is set to rise

by more than 20ppt in 2020 on fiscal and credit expansion. Looking beyond the current

business cycle, the government has highlighted the importance of preserving policy

space amid China’s long-term competition with the US. We expect the budget deficit

to be lowered to c.6% of GDP in 2021 from an estimated actual deficit of 8% in 2020.

Policy rates are likely to stay on hold throughout 2021, with credit and money growth

being brought down to a level in line with nominal GDP growth.

North Asia – On the mend

In Hong Kong, a modest recovery is underway. We expect China’s steady growth and

the Fed’s dovish reassurance to continue to support the nascent recovery in the coming

quarters. Lingering headwinds from widespread travel bans and further upside risk to the

local unemployment rate limit Hong Kong’s recovery headroom in 2021, however. In

Taiwan, we expect GDP growth to pick up to 3.3% in 2021 from 1.8% in 2020; Q3-2020

was surprisingly strong. Taiwan should continue to benefit from reshoring activity,

moderately loose fiscal and monetary policy, and vaccine-related optimism.

For Japan, we raise our 2021 growth forecast to 3.0% to reflect recent positive data

surprises and a better trade environment, although the recent surge in coronavirus cases

at home and abroad is likely to weigh on the recovery in Q4-2020. We expect PM

Yoshihide Suga to provide aggressive fiscal support ahead of the Tokyo Olympics

(scheduled for July-August 2021) and general elections (to be held by October 2021).

We forecast Korea’s growth at 2.9% in 2021, taking into account short-term risks from

partial lockdowns globally amid new waves of COVID-19; stricter social-distancing

measures are likely to hit domestic consumption in the short term. While Korea’s

expected headline growth in 2021 may appear relatively low, the economy was much

more resilient in 2020 than OECD peers. We expect strong exports to underpin Korea’s

growth in 2021, growing in high single digits amid a more favourable trade environment.

ASEAN and South Asia – Key beneficiaries of vaccine rollout

Vaccine development and distribution are particularly critical for the ASEAN and South

Asia region, given the importance of tourism to many ASEAN economies and the

severity of the outbreak in India. Vaccine rollout should provide an important boost to

the region’s growth in 2021. Some governments have reportedly secured vaccine

deals with pharmaceutical companies, although widespread vaccination is unlikely

before H2-2021 given logistical hurdles in large countries such as India and Indonesia.

We expect a firmer pick-up in sequential growth only in H2-2021. Governments may

maintain a cautious approach to social-distancing restrictions in H1 amid periodic

resurgences in infections. As a result, growth may be uneven and bumpy. While the

region’s growth is likely to remain below pre-pandemic levels, we are positive on the

outlook for 2021. Bangladesh and Vietnam in particular are expected to remain growth

outperformers, both within the region and globally.

North Asia should see a

continuation of the economic

recovery that started in 2020

With the recovery underway, the

authorities are likely to start

preparing for a policy exit

ASEAN and South Asia will likely

see a firmer recovery in H2-2021




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With the demand boost from COVID-related stimulus fading, we expect some ASEAN

governments to revive their infrastructure pushes in 2021. Indonesia, the Philippines

and Malaysia have increased their infrastructure budgets for 2021, after having

diverted funds to pandemic measures in 2020. While most countries in the region are

likely to maintain spending at similar levels to this year, we expect fiscal deficits to

narrow as governments balance concerns about leverage and rating risks against

growth considerations; this is particularly true in India. While we forecast further rate

cuts in Indonesia and the Philippines in H1, we otherwise expect a neutral monetary

policy impulse in 2021.

MENAP – A muted recovery

In the Middle East, North Africa and Pakistan (MENAP) region, we forecast a relatively

muted recovery to 2.0% in 2021. The average masks wide disparities – we expect

Egypt to achieve the fastest growth in the region (among our covered economies) and

Lebanon to see a double-digit contraction in 2021. For the region’s oil-producing

economies, continued production curbs are likely to limit growth prospects, with the oil

sector continuing to underperform. Accelerated vaccine rollout would benefit the

tourism-dependent economies of Egypt and the UAE the most; this is particularly true

for the UAE given its hosting of Expo 2020 in October 2021. In the GCC, the permanent

departure of foreign workers, with the prospect of longer-term declines in population

size, risks pulling potential growth lower.

Reforms are likely to continue, with a focus on building the non-oil tax base. Saudi Arabia

tripled its VAT rate in 2020. Oman is likely to introduce a VAT regime by April 2021.

Bahrain may come under greater pressure to accelerate non-oil revenue mobilisation.

We expect debt levels to rise across the GCC, with the exception of Qatar.

SSA – A year of technical recovery

While 2021 will be a year of technical recovery, many economies in the region will

remain below pre-COVID growth trends. Even prior to the pandemic, softer commodity

prices had already weakened growth momentum in Africa. The COVID shock weighed

further on government revenue, widening deficits and pushing public debt ratios higher.

Almost all countries in the region have financed their 2020 fiscal deficits through larger

borrowing. While privatisation of state assets is back on the agenda in a number of

countries in 2021 (including South Africa, Nigeria and Angola), underlying revenue

momentum is likely to take longer to recover.

The trend of rising public debt is unlikely to reverse, despite the temporary deferral of

multilateral and bilateral debt obligations (currently to June 2021) for countries

participating in the G20 Debt Service Suspension Initiative (DSSI). Encouragingly, the

issue of market access for DSSI beneficiaries appears to have been resolved.

Eurobond issuance is still possible, subject to IFI approval; this sends a reassuring

message that DSSI take-up will not preclude market access for beneficiary countries.

Continued market access will be necessary to support public investment and prevent

the emergence of a new debt crisis, in our view.

Global trade – Reasons for optimism in 2021

Global trade is likely to improve in 2021 as activity resumes and global growth picks

up; the global recovery should support exports through both increased volumes and

higher prices (see Global trade – Reasons for optimism in 2021). The recovery in global

trade has been much faster in 2020 than during the GFC period. Global trade took

more than two years to recover to pre-GFC levels; this time, export volumes have

MENAP recovery is likely to be

gradual; vaccine rollout will lift

tourism-dependent economies

the most

Many SSA economies are unlikely

to return to see pre-COVID growth

trends in the near term

Global trade is expected to improve

in 2021 on the improved economic

outlook; both volumes and prices

are expected to rise

https://research.sc.com/https://research.sc.com/research/api/application/protected/rp/api/data/render/187351



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already rebounded from the lows of Q2-2020 and are close to end-2019 levels

(Figure 7). We expect export volumes to pick up further in 2021 as global demand

returns – particularly in H2-2021, when vaccines are more widely available and social-

distancing measures are relaxed. The improved trade environment under a Biden

presidency in the US should also benefit export-oriented economies in 2021,

particularly in Asia, which suffered the effects of the US-China trade war in 2018-19.

The recent signing of the Regional Comprehensive Economic Partnership (RCEP), an

Asia-wide free-trade agreement, is a positive statement on the region’s willingness to

maintain open trade flows.

Risks for 2021

Not enough policy tools in the cupboard

The policy response by authorities in 2020 has been unprecedented in terms of both

speed and scale. Central banks globally have cut interest rates and expanded their

balance sheets, and governments have delivered large fiscal stimulus packages.

While these measures have been effective in containing downside risks to economic

growth, they have come at the cost of stretched sovereign balance sheets and

increased levels of indebtedness. This large-scale support was the right response to

the crisis, but it has depleted the policy cupboard. The concern is that policy makers

have few remaining options in case setbacks to the economic recovery require

additional policy support.

Underestimating the risk of inflation

Our core assumption is that the still-wide output gap and lingering economic weakness

will keep inflation very low in 2021. While headline inflation is likely to pick up in Q2-2021

on base effects, we expect central banks to look through this and focus on core inflation,

which will likely stay subdued; this should allow monetary policy to stay accommodative.

Depressed demand conditions suggest that a focus on inflation is unlikely to be

warranted soon. However, we do see a risk that supply-side constraints could lead to

higher operational and raw-material costs (Figure 8). Supply bottlenecks have caused

cargo costs to move higher; could this be a source of inflation as demand conditions

tighten and trade flows pick up next year. Even during the pre-COVID period, central

banks were struggling to get inflation to rise to their targets; we expect them to tolerate

higher inflation and allow it to reach the upper end of their target ranges. That said,

markets may be less willing to look the other way should inflation start to rise towards the

upper end of central banks’ target zones.

Figure 7: Export volumes have rebounded sharply

CPB export volume index, April 2008=100

Figure 8: Freight prices have increased due to export-

import mismatches (China freight index, Jan 1998 = 1000)

Source: Bloomberg, Standard Chartered Research Source: WIND, Shanghai Shipping Exchange, Standard Chartered Research

EM

DM

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Apr-08 Apr-10 Apr-12 Apr-14 Apr-16 Apr-18 Apr-20

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Jan-12 Apr-13 Jul-14 Oct-15 Jan-17 Apr-18 Jul-19 Oct-20

Having thrown the kitchen sink at

the problem in 2020, do policy

makers have more options left?

Could supply-side inflation become

a bigger threat in 2021?




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Commodity prices are pricing in an economic recovery

Base metals rise on China demand

We think the base metals complex should benefit from the backdrop of a weak USD,

China’s ongoing economic recovery, positive risk sentiment and US stimulus packages

(Figures 9 and 10). While the balance of risks points to further price gains, we expect

these gains to be uneven. We believe China’s economic recovery has been pivotal to

the recovery in copper prices, boosting copper demand and imports. The country’s

new infrastructure campaign should further support copper demand through the build-

out out the 5G network, electric vehicle charging infrastructure, ultra-high voltage

transmission lines, and wind power installations. China’s refined copper imports have

been especially robust owing to tight concentrate markets in 2020 (due to COVID-

related mine disruptions) and uncertainty around its scrap supply policy. The demand

recovery ex-China has been subdued in comparison, but we expect demand to pick

up in line with the broader economic recovery in 2021.

Upside risk to oil prices from a stronger economic recovery

We forecast that average global oil demand will recover less than 60% of its 2020 loss

in 2021; this year, we forecast a demand decline of 9.68 million barrels per day (mb/d),

or 9.7%, versus 2019. Beyond the direct impact on demand, we think the pandemic

has caused a longer-term crisis of confidence in the health of the oil market. Oil prices

would not have recovered as strongly from their Q2-2020 lows without the OPEC+

agreement and high compliance with targets by almost all of its signatories.

We see upside risks to oil prices should the economic recovery be stronger than

expected. A weak dollar, increased asset allocation to commodities, a faster-than-

expected fall in US shale oil output, the continuation of production curbs, and slow or

limited progress on the reopening of dialogue between the US and Iran, could put

additional upward pressure on oil prices.

Watershed US election should bring greater predictability

A divided Congress could cause gridlock

The extent to which President Biden can shape US policy will depend largely on the

Democrats flipping the Senate in January, when the two remaining seats will be

contested in runoff races. For now, polls show a close contest that favours the

Republicans (who must win one seat only out of the two to keep control of the

Senate). Such a scenario would result in legislative gridlock, with Biden struggling to

pass his boldest campaign promises, including on tax increases or health care.

COVID-related economic scars will likely force both parties to reach a compromise

Figure 9: Strong imports from China were a key support

for copper prices in 2020; China imports of copper, ‘000s

Figure 10: Increased activity in China is likely to support

copper prices; Copper price (USD/t), China PMI (RHS)

Source: Bloomberg, Standard Chartered Research Source: Bloomberg, Standard Chartered Research

200

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Oct 10 Oct 12 Oct 14 Oct 16 Oct 18 Oct 20

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Dec-17 Jul-18 Feb-19 Sep-19 Apr-20 Nov-20

China’s unwrought copper imports

are up over 40% YTD; copper

demand prospects boosted by the

EV and renewables sector

Major policy initiatives will depend

on President-elect Biden’s ability to

work across the political divide

The pandemic has caused a longer-

term crisis of confidence in the oil

market




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on a fiscal stimulus package; we expect horse-trading on spending priorities. While

the lack of large-scale fiscal stimulus would be negative for growth prospects,

markets would see a divided Congress as positive, as it would limit Biden’s ability to

push through market-unfriendly policies.

The world will welcome more predictability from the White House

The occupant of the White House has always had a heavy influence on the tone of

global politics. But while a Democratic White House might shift the foreign policy mood,

a return to Obama’s playbook is unlikely. A degree of continuity with some of Trump’s

foreign policies is expected as Biden works within the realities of a global political

environment that is much changed from four years ago. That said, the Biden

administration is expected to take a more multilateral approach, which should support

global trade and cross-border investment flows – benefiting emerging markets.

• Biden could bring greater predictability to market-moving geopolitical issues, most

notably US-China relations; the constant headline risks that have defined the

past four years are likely to diminish under his presidency. To be sure, the US is

likely to maintain its tough stance on China, continuing to pressure Beijing to open

up its economy to US exports and investment, protect intellectual property rights,

and avoid the forced transfer of technology. However, Trump’s emphasis on the

bilateral deficit and tariffs is likely to give way to a more systematic and rules-

based approach to the competition with China. The US is likely to seek support

from key allies in Europe and Asia as it continues to reassess the world’s most

important bilateral relationship.

• The change of administration may put some countries at a disadvantage. Turkey,

Saudi Arabia and Russia have arguably been spared a tougher US approach

under Trump’s presidency because of his personal stance towards their leaders.

While these countries have faced threats of US retaliation – and sanctions, in the

case of Russia and Turkey – in recent years, and the broader US consensus may

be for a tougher approach, this has not been fully pursued during the Trump

presidency. His departure could change some of these calculations.

• The Middle East may be the most affected by the change of administration. The

Trump administration has tended to view Middle East geopolitics along the simple

fault line of whether countries are pro- or anti-Iran; the Biden administration is

likely to abandon this approach. In the GCC, US overtures toward Iran could

rekindle the unease that existed during the Obama years and further incentivise

the bloc’s recently initiated rapprochement with Israel.

A Biden administration is likely to

take a more multilateral approach,

supporting global trade and cross

border commerce

A Biden administration is unlikely

to let up on the US’s tough stance

on China

A Biden administration is likely to

alter relations with Russia, Turkey,

Saudi Arabia




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Global charts Figure 1: 2021 global growth to be driven by favourable base effect after sharp 2020 contraction

GDP, % y/y

Source: IMF, Standard Chartered Research

Figure 2: Inflation to remain subdued in 2021; central banks are likely to stay accommodative

Inflation, % y/y


2021 global growth

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Figure 3: India’s C/A likely to return to deficit as trade balance normalises; Saudi Arabia’s deficit to narrow on higher

Oil prices (current account, % of GDP)


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Figure 4: US to return to Q4-2019 GDP level by end-2021;

euro area to remain below

GDP levels, Q4-2019 indexed to 100

Figure 5: Deadweight loss to global growth in 2020 is

unlikely to be recouped in the near term

Global GDP levels, 2019 indexed to 100

Note: Quarterly GDP levels used for US and euro area; 4-quarter rolling sum used for China,

Source: Standard Chartered Research


Figure 6: Balance sheets to continue to expand

G3 balance-sheet size, % of GDP

Figure 7: Fiscal stimulus packages announced in 2020 so

far compared to during the GFC (% of GDP)

Source: Fed, ECB, BoJ, Bloomberg, Standard Chartered Research Note: Excludes loan guarantees and other financial support measures

Source: ILO, Standard Chartered Research

CN

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GlobalQ4-2019 level

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Figure 8: COVID resurgence delays return to normalcy

% deviation from baseline* (LHS); % change 7DMA (RHS)

Figure 9: Global trade recovery this time is faster than the

GFC period (export volumes, indexed to Q4-2019 average)

*Baseline is indexed to 3 Jan to 6 Feb 2020, Source: Bloomberg, Google mobility,

Standard Chartered Research

Source: Bloomberg, Standard Chartered Research

Transit mobility in US

US COVID cases (RHS-inverted)

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Figure 10: Several major economies have vaccine arrangements with pharmaceutical companies

Current vaccine arrangements for selected major economies

Vaccine arrangement with Size of existing arrangement (no. of doses)

EU

BioNTech/Pfizer 200mn, with option for a further 100mn

Moderna 80mn, with option for a further 80mn (to be agreed)

AstraZeneca/Oxford 300mn, with option for a further 100mn

Johnson & Johnson 200mn, with option for a further 200mn

CureVac 225mn, with option for a further 180mn

Sanofi-GSK 300mn

Novavax Talks ongoing

Switzerland

BioNTech/Pfizer 3.0mn

Moderna 4.5mn

AstraZeneca/Oxford 5.3mn

WHO-led programme 3.2mn

United Kingdom

BioNTech/Pfizer 40mn

Moderna 5mn

AstraZeneca/Oxford 100mn

Novavax 60mn

Sanofi-GSK 60mn

Johnson & Johnson 30mn

Valneva 60mn

United States


Moderna 100mn


Novavax 110mn

Sanofi-GSK 100mn


Canada


Moderna 56mn


Novavax 76mn

Sanofi-GSK 72mn


Medicago 76mn

Japan


Moderna 50mn


Novavax 250mn

China Five China-led vaccines are currently undergoing phase 3 testing

610mn

Australia


AstraZeneca/Oxford 33.8mn

Novavax 40mn

University of Queensland 51mn

India


Novavax 1bn

Gamaleya Research Institute 100mn

Indonesia


Novavax 30mn

Sinovac 50mn

G42 Healthcare 60mn

Brazil


BioNTech/Pfizer Unknown

Gamaleya Research Institute 50mn

Sinovac 46mn

COVAX


Sanofi-GSK 200mn

COVAX vaccines 200mn

Source: Launch and Scale Speedometer; publicly available sources; Standard Chartered Research


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Global overview

Geopolitical economics

Asia

MENAP

Africa

Europe

Americas

Strategy outlook

Forecasts and references

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Key elections to watch in 2021 Sub-Saharan Africa and Latam dominate the electoral calendar for the coming year

Source: Official sources, Standard Chartered Research

Mexico

6-Jul-21 | LeVoters will elect 500 deputies (300 by constituency, 200 by proportional representation) to sit in the Chamber of Deputies. These are ‘midterm’ elections being held halfway through the president’s six-year mandate.

Peru11-Apr-21 | Pr/LePeruvians are scheduled to vote to elect the president, VP and MPs. Following a constitutional crisis in 2019-20 and snap elections in 2019, the legislature is made up of multiple small parties. The congress’ impeachment of President Vizcarra in November was followed by mass protests and violence. The volatile political landscape could cause concern for investors ahead of the election.

South AfricaJul-Aug 21 | LGThe election will be a test of the popularity of President Cyril Ramaphosa and the ruling African National Congress (ANC) amid the economic and health challenges of the pandemic. Lower support for the ANC versus 2019 levels (58%) could be seen as an indication of a possible leadership challenge within the party in 2022. Conversely, ANC support exceeding the 2019 level would likely cement the president's position.

Ethiopia

Jun-21 | LeElections have been pushed back multiple times. At stake is the reform agenda of PM Abiy Ahmed amid a highly fragmented political landscape and an increase in domestic instability. The recent further deterioration in the security and political environment could further delay the elections and raise concerns about possible wider regional destabilisation.

Zambia12-Aug-21 | Pr/LeElections will be held amid tough economic conditions following Zambia’s default on its external debt. Fiscal resources will be limited ahead of the ballot. Changes put in place ahead of Zambia’s last election in 2016, including the composition of the Constitutional Court, may favour the re-election of the incumbent, President Lungu, who is seeking a final term in office.

Iran

18-Jun-21 | PrElections will take place amid heightened tensions following years of sanctions and a loss of political capital for current President Hassan Rouhani and his reformist movement (after the US withdrawal from the nuclear deal the reformists had fought for). The election might provide a key indication of the authorities’ tolerance for moderate candidates, and the country's future relationship with the international community.

Ecuador07-Feb-21 | Pr/LeAndrés Arauz, a protégé of former (leftist) President Correa, leads in the polls against Guillermo Lasso, who is viewed as being too close to the unpopular conservative incumbent Lenin Moreno. The fractured right could give Arauz a chance in a second-round vote. 300 National Assembly members will also be elected. This election is widely seen as a test of whether Ecuador will return to populism or consolidate democratic reforms.

The Gambia

4-Dec-21 | PrIncumbent President Barrow will seek re-election with his National's People Party (NPP), which he formed in 2020 following the collapse of the coalition that ousted longstanding President Jammeh in 2016. Barrow’s main challenger is likely to be Ousainou Darboe of the opposition United Democratic Party (UDP), who served as his VP until 2019. Barrow is likely to enjoy an incumbent advantage, but the election could be closely contested.

Uganda14-Jan-21 | Pr/LeUgandans will vote to elect the president and MPs. Incumbent President Museveni has ruled for 34 years and is seen as the favourite. Ten other candidates are running. Violence has erupted during the campaign, with several dead and key opposition leader Bobi Wine arrested on an alleged breach of COVID containment regulations.

Pr Presidential

Le Legislative

LG Local government


Geopolitical economics



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2021 geopolitics – Same same, but different

• Biden will likely change the US approach to international relations

• While this could prove less disruptive, existing problems will persist

• Idiosyncratic regional and country risks could rattle markets

Biden to reframe the narrative

The occupant of the White House has always had a heavy influence on the tone of

global politics. Trump’s presidency was highly eventful for international relations,

calling into question decades-old alliances, creating a vacuum where US leadership

had previously dominated, and – most importantly – taking a short-term transactional

approach to foreign policy, marked by sudden and unpredictable shifts. This created

market volatility that, in some countries and regions, exacerbated pre-existing

idiosyncratic issues. While a Democratic White House might shift the tone on foreign

policy, a return to Obama’s playbook is unlikely. A degree of continuity with some of

Trump’s foreign policies is expected as Biden works with the realities of a global

political environment much changed from four years ago.

Biden could bring greater predictability to market-moving geopolitical issues, most notably

US-China relations. While Biden may take a less erratic approach, the US is likely to

maintain its tough stance on China, continuing to pressure Beijing to open up its economy

to US exports and investment, protect intellectual property rights, and avoid the forced

transfer of technology. However, Trump’s emphasis on the bilateral deficit and tariffs is

likely to fade, giving way to a more systematic and rules-based approach to the

competition with China. The US is likely to seek support from key allies in Europe and Asia

as it continues to reassess the world’s most important bilateral relationship.

Figure 1: 2021 geopolitical risks


China US relations

Ongoing strategic tensions

Saudi ArabiaUS relations

Geopolitical realignment

India US-China relations

Alignment with US could increase

tensions with China

North KoreaUS relations

NK tests Biden administration

TurkeyUS relations

Sanctions risk

South AfricaElections

Challenge of leadership legitimacy

TaiwanChina relations

Increasing cross-strait tensions

PeruElections

Instability, populism

RussiaUS relations

Sanctions risk

CountryRisk type

Potential consequences

Iraq US relations

Risk profile could improve

Iran US relations

Failure of talks

EthiopiaDomestic

Instability, violence

Côte d'IvoireElections

Instability

Egypt US relations

Increased tensions; US aid at stake

Philippe Dauba-Pantanacce +44 20 7885 7277

[email protected]

Senior Economist | Global Geopolitical Strategist

Standard Chartered Bank

The occupant of the White House

plays an outsized role in setting the

tone for global politics; Biden will

likely reframe some of these

conversations




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The change of administration may increase risks for some countries. Turkey, Saudi

Arabia and Russia have arguably been spared a tougher US approach under Trump’s

presidency because of his personal stance towards their leaders. While these

countries have faced threats of US retaliation – and sanctions, in the case of Russia

and Turkey – in recent years, and the broader US consensus may be for a tougher

approach, this has not been fully pursued during the Trump presidency. His departure

could change some of these calculations.

Geopolitical risk in 2021 – Regions/countries to watch

Several countries and regions face existing political risks that will need to be closely

monitored in 2021.

In Asia, the Biden administration will face ongoing geopolitical risks including North

Korea and the South China Sea. North Korea will likely try to test the new

administration’s appetite for concessions, and assess whether Biden will resume

Obama’s doctrine of “strategic patience” with North Korea. In the rest of Asia, some

US allies have expressed concern about a return to Obama’s perceived failure to

contain a more assertive China – and its repercussions for neighbouring countries. On

Taiwan, cross-strait tensions have increased in recent months as the Trump

administration has deepened diplomatic engagement with Taiwan and increased

‘freedom of navigation’ exercises in the area to unprecedented levels. According to

many political analysts, US-Taiwan ties are at their strongest since the US switched

diplomatic recognition from Taipei to Beijing in 1979.

US relations with India might also come into focus as Washington attempts to cement

its relationship with New Delhi, continuing the existing US pivot towards India.

Illustrating this shift, during Trump’s presidency US government agencies (including

the Pentagon and State Department) began referring to the ‘Indo-Pacific’ region as

opposed to the ‘Asia-Pacific’ region. Skirmishes on the China-India border have

multiplied in recent months, raising the geopolitical stakes.

In the Middle East, where the US has played an important role for decades, the

likely shift in focus and alignment under the Biden administration warrants attention.

Biden has confirmed that his administration will seek to re-engage with Iran; he

raised this with Israel’s Netanyahu in their first exchange after he became president-

elect. This is a contrast to the Trump administration, which has tended to view Middle

East geopolitics along the simple faultline of whether countries are pro- or anti-Iran.

This has resulted in a strengthening of the axis of Sunni Arab countries, the US and

Israel, culminating in some Arab countries recognising Israel for the first time in a

quarter-century.

In the GCC, US overtures towards Iran – in addition to possibly further disrupting a

fragile oil market – could rekindle the unease that existed during the Obama years.

This could further incentivise the bloc’s recently initiated rapprochement with Israel.

Conversely, Iraq could find itself in an easier geopolitical position in a Middle East

where strategic cooperation and alliances are not seen solely through the Iran angle.

Biden has spoken of taking a tougher stance on Saudi Arabia; the US Congress had

initiated several bipartisan motions in this direction during Trump’s presidency, which

he opposed and prevented from coming to fruition. While this might create some noise

in the months to come, on balance, we do not think that Biden will want to profoundly

alter this strategic axis.

In the Middle East, the new US

government will likely depart from

the Trump administration’s

geopolitical approach

Asia’s geopolitical hotspots under

Trump will likely remain similar:

North Korea, Taiwan, and the

competition for influence in

the region




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A more principles-based approach by the Biden administration could also translate into

tensions with – or at least a reassessment of – US relations with Egypt. The country

has been the second-largest recipient of US military aid for decades, and has benefited

more recently from the strong personal relationship between Trump and President Sisi.

Biden has pledged, “America’s commitment to democratic values and human rights

will be a priority, even with our closest security partners”. In the US State Department’s

annual country reports for 2020, Egypt received some of the harshest criticism of any

US security ally, on issues such as alleged abuses by state security services, including

torture; repression of individual and collective liberties; and restrictions on the press

and political activities. Biden’s team is likely to tread carefully with a country that is

viewed as pivotal in the region from a security, military and strategic perspective. But

the US tone could change, and there is precedent for a tougher stance on Egypt. In

2017, the State Department successfully pushed for millions of dollars of US military

aid to be withheld over Egypt’s failure to improve human rights (the aid was later

reinstated). The State Department made a similar request in March 2020, according to

US media reports.

Turkey could be vulnerable to market volatility, as it faces concrete risks from the

change of US administration. Turkey is at odds with the US on three main fronts:

potential sanctions under the Countering America’s Adversaries Through Sanctions

Act (CAATSA), tied to Turkey’s purchase of the Russian S-400 anti-missile system;

unresolved issues at Turkey’s Halkbank, which is under prosecution in the US on bank

fraud, money laundering and conspiracy charges; and wider geopolitical differences,

which are now mostly centred in the eastern Mediterranean. The US Congress – joined

by several US agencies, the Pentagon and the State Department – has repeatedly

called for sanctions against Turkey, most notably on the S-400 issue; Trump has

resisted these calls. Biden, in contrast, has been critical of Turkey’s leadership and

would likely take a tougher approach. However, Biden will likely try to balance this with

Turkey’s status as a member of NATO (and its second-largest standing military force).

The early months of the Biden administration will be crucial to the direction US-Turkey

relations take; a positive reset is possible. However, Turkey could face market risks if

it presses ahead with S-400 activation and other issues that have antagonised the US.

Russia is also seen as negatively affected by a Biden administration, but we think

substantial economic repercussions are unlikely. This is partly because broad

sanctions against Russia are already in place. Biden has been clear about his desire

to impose further restrictions on some of Russia’s actions. Russia is already under a

mix of diplomatic sanctions (which can include expulsion of diplomats and closure of

consulates); sanctions against individuals, industrial sectors, and specific entities; and

wide-ranging systemic sanctions similar to those against Iran or North Korea, which

include secondary sanctions that penalise people and organisations not under US

legal jurisdiction.

On the one hand, the Biden administration will likely seek to engage Russia in areas such

as arms reduction or on Iran. On the other, Biden has said that his administration would

want to impose costs on Russia’s strategy of exerting global influence through

opportunistic and destabilising foreign interventions (including cyber-attacks, the

annexation of Crimea and the poisoning of agents). Striking such a balance might mean

continuing with targeted measures such as individual, entity or sectoral sanctions rather

than taking a more aggressive systemic approach. Biden’s desire to rebuild the Atlantic

alliance might also favour this approach, which Europe has followed so far.

Turkey is seen as disadvantaged by

a Biden win

The US approach to Russia will

likely be a mix of occasional

engagement and pushback falling

short of systemic sanctions




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Others to watch

In Africa, low-level tensions over the Grand Ethiopian Renaissance Dam (GERD)

could continue. Ethiopia has so far resisted signing a binding legal agreement with

neighbouring Sudan and Egypt on filling and operating the dam, resulting in a

stalemate and heated rhetoric from all three sides. However, we do not see the dispute

posing a material geopolitical risk, as an escalation of the conflict is not in the interest

of any of the parties.

In Ethiopia, Ethno-regional tensions have steadily risen in recent months, and the

central government sent troops to the restive northern region of Tigray in November.

The country of 110mn people is Africa’s second-most populous and has been one the

fastest-growing economies in the region in recent years. The reformist agenda of Prime

Minister Abiy Ahmed (who took office in 2018) has attracted investor interest and

favour from multilateral institutions. But the country has struggled to deal with tense

relations between the central federal power in Addis Ababa and Ethiopia’s 10

autonomous regions. Abiy’s national unity agenda has left some regions feeling that

their autonomous status was under threat. Until Abiy’s ascent to the premiership, the

Tigrayan ethnic group – representing around 6% of the country’s population – had

dominated Ethiopian politics for decades. Given Ethiopia’s dominance in the Horn of

Africa, any destabilisation there could unsettle the region’s fragile stability.

In Côte d’Ivoire, there had been concern about violence following the October 2020

elections, but the risk of violent escalation has been averted so far. Key questions

remain, including potential electoral reforms ahead of parliamentary elections (planned

for 2021) and the possibility of steps towards reconciliation, such as the return of former

President Laurent Gbagbo from exile.

In South Africa, municipal elections in August 2021 will be a test of the popularity of

President Cyril Ramaphosa and the ruling African National Congress (ANC) amid the

challenges of the pandemic. Many would see a decline in support for the ANC relative

to 2019 (58% support) as an indication of a possible party leadership challenge in

2022. Conversely, ANC support exceeding the 2019 level would likely cement the

president's position.

In Latin America, Peru – the world’s second-largest producer of copper, zinc and

silver – could be headed for turbulence. After a constitutional crisis that has lasted

since 2019, the congress voted overwhelmingly on 9 November to impeach

President Martín Vizcarra, a centrist and reformist, on corruption allegations. Three

presidents then succeeded each other within a week. The current president,

Francisco Sagasti, is a technocrat and former World Bank official. General and

presidential elections are planned for April. The move to impeach Vizcarra was

widely seen as an attempt by members of parliament to shield themselves from

investigations arising from Vizcarra’s anti-corruption campaign. About half the

members of Peru’s unicameral congress are under investigation, mostly for

corruption; they are shielded by parliamentary immunity. An overwhelming majority

of Peruvians (78%) opposed the impeachment, according to an Ipsos poll. The

disconnect between the population and the political class could widen further ahead

of the elections. Many of the presidential candidates (who currently number 23) are

little known, inexperienced and viewed as populists. Protests or an election outcome

that is unfriendly to markets could put Peru on investors’ risk radar.

Africa faces several idiosyncratic

risks; Peru faces political volatility


Economies – Asia



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Asia – Top charts Figure 1: Asia’s COVID-19 curves had mostly flattened;

resurgence in infections to delay return to normalcy

Confirmed cases, % 7D/7D change

Figure 2: Most economies to recover to pre-COVID levels

only by end-2021

GDP levels, % deviation from Q4-2019

Source: CEIC, Standard Chartered Research Source: Bloomberg, CEIC, Standard Chartered Research

Figure 3: Rate cuts have been front-loaded

Policy rate cuts, bps

Figure 4: Fiscal policy to remain expansionary in 2021

Fiscal deficit, % of GDP

Source: Bloomberg, Standard Chartered Research ^SG, IN: 2021 is fiscal year ending Mar-2022; NZ: 2021 is fiscal year ending Jun-2021; TH: 2021 is fiscal year ending Sep-2021, Source: Bloomberg, Standard Chartered Research

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

May Jun Jul Aug Sep Oct Nov

IN ID MY

PH SG TH

VN AU NZ

CN TW KR

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

CN TW ID IN KR NZ AU MY SG PH TH

Q4-2020F Q1-2021F Q2-2021F

Q3-2021F Q4-2021F

-250

-200

-150

-100

-50

0

PH ID MY IN TH NZ KR AU TW

Done in 2020 Forecast in 2021

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

SG^ IN^ PH NZ^ VN ID MY TH^ AU

2019 2020F 2021F

Figure 5: Inflation to remain subdued in 2021

Inflation, % y/y

Figure 6: Asia’s exports to China and US lead the trade

recovery (Asia ex-China exports, % y/y 3mma)

Source: CEIC, Standard Chartered Research Note: Asia refers to AU, NZ, HK, TW, ID, IN, JP, KR, MY, PH, SG, TH, VN Source: CEIC, Standard Chartered Research

4.5%

2.9%

2.2%

0.7%1.0%

0.3%

1.0%

2.0%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

IN PH ID KR TW SG* TH MY*

Central bank target range

Our forecast (2021 average)

-30

-25

-20

-15

-10

-5

0

5

10

15

20

Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20

Total CN

US EU

Rest of world




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Asia – Macro trackers Figure 1: USD export growth – Improvement in exports led by Northeast Asia

Shades of green (or red) indicate better (worse) growth compared to the past three years; darker shades show a stronger signal

Source: CEIC, Standard Chartered Research

Figure 2: Local-currency export growth – Exports to continue to recover on global economic re-opening

Shades of green (or red) indicate better (worse) growth compared to the past 3 years; darker shades show a stronger signal


JP Highest

KR

CN

HK

TW

ID

MY

PH

SG

TH

AU

IN Lowest

NE Asia

Greater

China

ASEAN

2018 2019 20202014 2015 2016 2017

JP Highest

KR

CN

HK

TW

ID

MY

PH

SG

TH

AU

IN Lowest

NE Asia

Greater

China

ASEAN

2018 2019 20202014 2015 2016 2017

Figure 3: Current account – Sharper import contraction has led to a surplus in India, narrower deficit in Indonesia

Shades of green (or red) indicate surplus (or deficit); darker shades show a stronger signal


JP Surplus

KR

CN

HK

TW

ID

MY

PH

SG

TH

AU

IN Deficit

0

NE Asia

Greater

China

ASEAN

2017 2018 2019 20202014 2015 2016




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