20180719-NATIXIS-Will_global_growth_be_resilient_to_stress__7页_892kb

Flash Economics Summary: Will Global Growth Be Resilient to Stress?

Core Content

The document titled "Flash Economics: Will global growth be resilient to stress?" published on 19 July 2018 discusses the potential impact of various global stressors on economic growth. These stressors include protectionist policies, geopolitical tensions, and political instability in Europe, which are contributing to increased uncertainty and risk aversion in financial markets.

Main Scenario and Key Concerns

The central thesis is that the global economy is currently facing a difficult moment due to the increasing stress, which is expected to lead to:

• A decline in global growth.
• Capital outflows from emerging countries.
• Rising funding costs for companies and banks.
• Fiscal solvency problems in certain countries, notably Italy.

Key Factors Affecting Global Growth

1. Renewed Capital Outflows from Emerging Markets

   • These outflows are leading to currency depreciation, which in turn causes inflationary pressures and reduced real income.
   • Higher interest rates are also reducing investment in these countries.
   • Charts 2A, 2B, 3A, 3B, and 3C illustrate these trends.

2. Rise in Funding Costs for Companies and Banks

   • The equity risk premium has increased, and equity markets have declined (Charts 4A, 4B, and 4C).
   • Credit spreads on corporate and bank bonds have widened (Charts 5A, 5B, and 5C), particularly for euro-zone banks.
   • These rising costs are expected to slow investment and reduce economic activity.

3. Reappearance of Fiscal Solvency Problems

   • Sovereign risk premia on peripheral countries' bonds in the euro zone have increased.
   • Italy is highlighted as being at risk of losing its fiscal solvency due to rising interest rates (Chart 7).
   • Charts 6A and 6B provide data on this trend.

Conclusion

The report concludes that the global economy is in a difficult phase, driven by the accumulation of stress factors. These factors are expected to hinder growth through:

• Capital flight from emerging markets.
• Higher borrowing costs for businesses and governments.
• Fiscal instability in some regions, especially in the euro zone.

The decline in global growth is forecasted as a result of these combined pressures (Chart 8).

Disclaimer and Legal Notes

• The document is intended for professional and qualified investors only.
• It is strictly confidential and must not be disclosed to third parties without prior consent.
• No personalized investment recommendations are made; the content is for general information.
• No liability is accepted for the accuracy, completeness, or use of the information.
• Natixis is supervised by the European Central Bank (ECB) and authorized by various regulatory bodies in France, the UK, Germany, Spain, Italy, and Dubai.
• The views expressed are those of the authors and may differ from those of Natixis or other entities.

Summary of Key Points

• Global Stressors: Protectionism, geopolitical tensions, and European political instability.
• Impact on Emerging Markets: Capital outflows, currency depreciation, inflation, and higher interest rates.
• Corporate and Bank Funding Costs: Increased equity risk premia and credit spreads.
• Fiscal Solvency Risks: Especially in the euro zone and Italy.
• Conclusion: A decline in global growth is expected due to these stressors.
• Legal and Regulatory Information: Document is subject to regulatory restrictions and confidentiality requirements.

This summary provides an overview of the document's main arguments, concerns, and legal context.